Preamble

The House met at a quarter before Three of the Clock, Mr. SPEAKER in the Chair.

NEW WRIT.

For the County of Renfrew (Eastern Division), in the room of Douglas Douglas Hamilton, commonly called the Marquess of Clydesdale, now the Duke of Brandon (Duke of Hamilton), called up to the House of Peers.—[Mr. James Stuart.]

PRIVATE BUSINESS.

London County Council (Money) Bill (Standing Orders applicable thereto complied with),

Mr. Speaker laid upon the Table,—Report from one of the Examiners of Petitions for Private Bills, That, in the case of the following Bill, referred on the First Reading thereof, the Standing Orders, which are applicable thereto, have been complied with, namely:

London County Council (Money) Bill.

Bill to be read a Second time.

Royal Society for the Prevention of Cruelty to Animals Bill [Lords],

The King Edward the Seventh Welsh National Memorial Association Bill [Lords],

Read the Third time, and passed, without Amendment.

Oral Answers to Questions — COAL INDUSTRY.

OUTPUT.

Mr. Thorne: asked the Secretary for Mines whether the mining industry will be able to produce the 270,000,000 tons of saleable coal per annum that he asked for at the outbreak of the war?

The Secretary for Mines (Mr. Geoffrey Lloyd): As the hon. Member will be aware, a Coal Production Council has been set up, under the chairmanship of Lord Portal, to deal with the question of production in all its aspects. I cannot at present give any figure of the output that may prove to be attainable.

Mr. T. Smith: In the discussions with the district organisations about increasing the production of coal, is the question of the absorption of unemployed miners into the industry being discussed?

Mr. Lloyd: Certainly, Sir.

Mr. A. Jenkins: asked the Secretary for Mines what immediate steps are being taken to increase the coal production of South Wales and Monmouthshire?

Mr. Lloyd: The chairman of the Coal Production Council has now arranged with the representatives of the colliery owners and mineworkers in South Wales for the establishment in that coalfield of a joint body to co-operate with the Council in securing an increase in production.

Mr. Jenkins: When does the hon. Member expect a decision?

Mr. Lloyd: This work is proceeding on a day-to-day basis, and I will inform the hon. Member when I am in a position to give him an answer on that point.

Mr. Jenkins: In view of the urgency of the matter, might I press the Minister to get a decision as speedily as possible?

Mr. Lloyd: So many concrete matters are being dealt with that I would prefer not to make a statement at the moment.

Oral Answers to Questions — BENZOL.

Mr. Butcher: asked the Secretary for Mines the price paid for benzol to gas companies at the outbreak of war and the price now being paid; whether he is satisfied that this is a fair price; and what steps are being taken to increase the production of benzol?

Mr. Lloyd: Under pre-war arrangements, the price of benzol was determined on the basis of an agreed formula, which was not completed until a considerable period after the end of the year. The final figures in respect of the year 1938–39 have not yet been announced. The question of current and future prices is at present under discussion between the interested parties. As regards the last part of the Question, as I informed the House on 20th March, the Committee on High Temperature Carbonisation have already recommended methods of increasing the recovery of benzol, and these recommendations are being implemented.

Oral Answers to Questions — OIL EXTRACTION.

Mr. Batey: asked the Secretary for Mines when he expects to begin to build plant to extract oil from coal in this country?

Mr. Lloyd: This Question involves a number of complex technical issues, which fall within the scope of the special inquiries about which I made a statement on 20th March. I hope to receive reports of these special inquiries shortly.

Mr. Batey: Will the Minister answer the Question? Will it be this year or next year, or will it be never?

Mr. Lloyd: It depends on the reports I receive.

Oral Answers to Questions — EXPORT TRADE.

Mr. James Griffiths: asked the Secretary for Mines whether he is aware that the figures published of the value of coal exported in the first three months of this year as compared with the corresponding period of last year reveal that but little progress is being made in expanding the coal export trade; and what further steps is he taking to secure an increase in this trade?

Mr. Lloyd: The hon. Member will be aware that in the first three months of this year the production of coal was interfered with by weather difficulties to an unprecedented extent; and supplies for export naturally suffered as well as supplies for the home market. Output is now recovering, and the Coal Production Council, which has been charged with the duty of securing increased output, is fully seized of the importance of securing additional supplies for export.

Mr. Griffiths: How soon does the hon. Gentleman expect supply to catch up with demand in regard to export coal?

Mr. Lloyd: When it will be met in full, I cannot say. I am sure that great efforts will be made to increase production for that purpose.

Oral Answers to Questions — WAITING SHIPS, SOUTH WALES PORTS.

Mr. Jenkins: asked the Minister of Shipping the number of ships waiting for coal last week in the ports of South Wales and Monmouthshire?

The Minister of Shipping (Mr. R. S. Hudson): The average number of ships waiting for cargo or bunker coal last week was: At Newport four, at Cardiff slightly under three, at Barry slightly over four, at Port Talbot there were only two days on which ships were waiting—two on one day and three on another. At Swansea one ship was waiting on each of three days.

Mr. Jenkins: Might I ask whether or not large numbers of ships now leave those ports in ballast because of the absence of cargoes?

Mr. Hudson: I would not say that a large number do so; but it is a fact that there is close co-operation between my Department and the Ministry of Mines, and if there is likely to be delay in getting a cargo, deep-sea ships are


bunkered and sent away in ballast, in order to avoid the holding-up of the ships that would be involved in waiting for coal.

Mr. Shinwell: Is it not true that a large number of ships could be liberated if the coal could be got?

Mr. Hudson: The situation in the earlier part of the war, I understand, was that there was more coal than ships. At present there is a surplus of ships, and that is likely to continue for the next few weeks. Undoubtedly, if more coal could be provided at present, my Department could get considerably increased quantities of shipping.

Mr. Jenkins: Is there the necessary co-operation between the right hon. Gentleman's Department and the Ministry of Mines in order to get cargoes and to make the ships available for them?

Mr. Hudson: There is the closest co-operation, but at present supplies of coal are inadequate for the demand.

Mr. George Hall: Is the right hon. Gentleman aware that large numbers of miners are unemployed who are willing to produce coal if they can get the opportunity?

Mr. Hudson: That is really a matter for another Department than mine, but I should point out that the shortage of coal applies not only to South Wales but equally to the North-East coast.

Mr. Gurney Braithwaite: Are there not cases of ships having been sent in ballast from South Wales to the Tyne exposing them to enemy attacks and unnecessarily risking the lives of our merchant seamen?

Oral Answers to Questions — FUEL OVERSEER, HORNCHURCH.

Mr. Parker: asked the Secretary for Mines whether he will investigate the circumstances under which a local fuel overseer for Hornchurch resigned his post and the local council refused to appoint a successor; whether he is aware that 35 cases of overcharging were reported to the divisional officer and that permission to prosecute was refused; and whether he has any statement to make on the report of the clerk of the Hornchurch Urban District Council made to that council, a copy of which has been forwarded to him?

Mr. Lloyd: Yes, Sir, I have made an investigation into the circumstances of this case, which are now the subject of correspondence with the local fuel overseer concerned. I will inform the hon. Member of the results of my investigations as soon as possible.

Mr. Parker: Is the hon. Member aware that there has been a great deal of disquiet in the area about the whole matter?

Mr. Lloyd: I think there has been some misunderstanding.

Oral Answers to Questions — ANGLO-IRANIAN OIL COMPANY (SALES, JAPAN).

Mr. Price: asked the Secretary for Mines the amount of oil sold and the amount already delivered to Japan during the period from September, 1939, to March, 1940, by the Anglo-Iranian Oil Company; what are the holdings of His Majesty's Government in this oil company; whether such sales were made with the knowledge of His Majesty's Government; and whether any special price concessions have been involved?

Mr. Lloyd: I have ascertained from the Anglo-Iranian Oil Company that they are supplying certain quantities of Iranian oil to Japan on a purely commercial basis. Although the Government have a majority holding in the company, they have announced from time to time that their policy is not to interfere with the commercial activities of this company, and I regret that I am not able to give details concerning the supplies now being made.

Mr. Price: Is the hon. Member aware that transactions of this kind create a very bad impression in the United States, where the action of His Majesty's Government, or of this company, is watched very closely?

Mr. Dalton: Can we be assured that no supplies are going to Germany, either directly or indirectly?

Mr. Lloyd: Not without notice.

Oral Answers to Questions — TRADE AND COMMERCE.

EXPORT TRADE.

8. Sir Reginald Blair: asked the President of the Board of Trade whether, by forming groups of industries, it is the aim of the Export Council to employ


export cartels for making collective bargains with foreign competitors and then to go further by quoting differential export prices, to be met by an accumulative cartel-fund based on home sales, and to accept the risk of retaliatory foreign dumping-duties?

The President of the Board of Trade (Sir Andrew Duncan): Export groups will organise themselves in the ways best calculated to promote the export trade of their members. In considering action such as my hon. Friend suggests, export groups will have the advice of the Export Council on all relevant points, including the risk of retaliatory duties.

Oral Answers to Questions — SMALL SHOPKEEPERS.

Mr. De la Bère: asked the President of the Board of Trade whether he will introduce legislation to ensure that the multiple stores shall be prevented from making further inroads into the business of the little shopkeepers wherever practicable, in view of the additional hardships and difficulties that the small shopkeeper is facing since the outbreak of the war?

Sir A. Duncan: Although I appreciate the hardships and difficulties to which my hon. Friend refers, I am unable to introduce legislation of the kind he suggests.

Mr. De la Bère: Is my right hon. Friend aware that the small shopkeeper is the backbone of this country and should have every possible protection and consideration?

Oral Answers to Questions — SOUTH-EASTERN EUROPE.

Mr. Mander: asked the President of the Board of Trade whether it is the policy of the Government in making trade agreements with countries in South-East Europe and elsewhere to make clear to them that the new trade channels are in tended to remain in being permanently after the peace, and that the markets of the British Empire will continue to be available to them on mutually advantageous terms?

Sir A. Duncan: I would refer the hon. Member to the reply given by the Prime Minister to a Question by the hon. and learned Member for Kingswinford (Mr. A. Henderson) on 18th April, when he said that it is the policy of His Majesty's Government so to develop their relations

with these countries as to ensure, so far as possible, a lasting increase in commercial exchanges with them.

Oral Answers to Questions — EXPORT CREDITS GUARANTEE SCHEME.

Sir R. Blair: asked the Secretary to the Overseas Trade Department whether the Export Credits Guarantee Scheme is to be developed into insuring separate individual export transactions, under Command 6183, which are subject to variations in exchange, losses by bad debts, and the various war risks from British factories till delivery in a foreign country, or is export trade development to be the uninsured bearer of the above-mentioned risks of loss of capital?

Mr. Shakespeare (Secretary, Overseas Trade Department): Any exporter who is prepared to insure his overseas turnover with the Export Credits Guarantee Department against insolvency risks can obtain at his option cover against the risk of frozen credits in practically every market in the world, and he is free to select a particular country for this purpose. These transfer facilities cover the exporter against delay or loss in the transfer of funds from a solvent buyer, whether due to economic causes, or war, or other similar disturbances. Arrangements are under active consideration at the present time with a view to making this valuable form of protection of still greater service to exporters, and I hope to be in a position to make an announcement on the subject shortly.

Oral Answers to Questions — SOUTH AFRICA.

Sir Granville Gibson: (for Sir Joseph Leech) asked the President of the Board of Trade whether the Export Council groups have secured any appreciable number of fresh customers in South Africa; whether they can undertake to deliver within a promised date, cotton piece goods, Kaffir sheeting and motor vehicles; and what is the Council doing to meet intensive competition in South Africa developed there by direct personal representation by competing foreign firms?

Sir A. Duncan: Our export trade to South Africa is being well maintained and on recent figures shows an appreciable increase in comparison with the corresponding period a year earlier. A special commissioner will very shortly be visiting South Africa and Rhodesia on behalf of


the Cotton Export Group to investigate and report on the opportunities of the market, while the Motor Industry Export Group already has the full services of the South African office of the Society of Motor Manufacturers and Traders.

Oral Answers to Questions — ECONOMIC WARFARE.

RUSSIAN IMPORTS.

Mr. Price: asked the Minister of Economic Warfare the quantities of aluminium, tin, rubber, copper and molybdenum imported by Russia for 12 months before the outbreak of war; and what comparison those figures bear to the quantities of these same articles imported through Vladivostock for the seven months since the outbreak of war?

The Minister of Economic Warfare (Mr. Cross): In the absence of official Soviet trade returns for any period later than November, 1938, it is not possible to give official figures for imports of the commodities referred to in the hon. Member's Question during the 12 months before the outbreak of war. The following figures extracted from the official statistics of exporting countries show the recorded exports to the U.S.S.R. during the period in question:



Tons.


Copper and brass
62,400


Tin
7,890


Rubber
23,900


No reliable figures are available for aluminium or molybdenum and the above figures are not necessarily complete. Official statistics for exports to the U.S.S.R. during the seven months since the outbreak of war are not available, but according to my information exports to the U.S.S.R. of copper and rubber very considerably exceeded exports of these commodities during the previous 12 months and exports of tin and molybdenum were also very large. The whole of the exports of these commodities to the U.S.S.R. since the outbreak of war have been shipped to Vladivostock. Before the war no copper or tin was sent by this route, but a small proportion of the rubber imports probably passed through Vladivostock.

Mr. Price: While thanking the Minister for that statement, can he say whether any portion of these materials going into Russia is going to Germany?

Mr. Cross: I have a good deal of reason to think that on statistical grounds, and also I have certain evidence that would indicate that some of these shipments have been sent to Germany.

Oral Answers to Questions — SWEDISH IRON ORE.

Mr. Mander: asked the Prime Minister whether, in view of the breakdown of international law as affecting neutrals as the result of German action throughout the war, he will give an assurance that appropriate steps will be taken to cut off completely the further supply of Swedish iron-ore to Germany by any route?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): His Majesty's Government are fully aware of the importance of this Question, but I am sure that the hon. Member will realise that in present circumstances I cannot give such a far-reaching assurance as he suggests.

Mr. Mander: Will the right hon. Gentleman bear in mind in this connection the fact that the neutrality of Sweden is being daily infringed by large numbers of German aircraft which fly over Sweden?

Mr. Butler: The hon. Member will have noted the very definite statement by Sweden respecting the infringement of her neutrality.

Oral Answers to Questions — BRITISH ARMY.

COURTS-MARTIAL (APPEALS).

Mr. Dingle Foot: asked the Secretary of State for War whether he has now reconsidered the advisability of publishing the report of the Committee on Appeals from Courts-martial?

The Secretary of State for War (Mr. Oliver Stanley): I have reconsidered the matter in the light of the Debate on the Army and Air Force (Annual) Bill, and it has now been decided to publish the committee's report.

Oral Answers to Questions — BALLYKINLAR CAMP, COUNTY DOWN (RAID).

Dr. Little: asked the Secretary of State for War whether any of the men who raided Ballykinlar military camp, county Down, on 10th February have yet been brought to justice; how many of the stolen rifles have been recovered: and


what steps have been taken to prevent the recurrence of such a raid upon the camp?

Mr. Stanley: No arrests have been made, and no rifles have been recovered. It would clearly not be desirable to publish the information asked for in the last part of the Question.

Dr. Little: Can my right hon. Friend say whether there is any prospect at all of these raiders being brought to justice?

Mr. Stanley: That is a matter for the police authorities in Northern Ireland.

Oral Answers to Questions — DEPENDANTS' ALLOWANCES.

Mr. Lipson: asked the Secretary of State for War whether he will arrange that where a member of His Majesty's Forces is a widower and his sister is responsible for the care of his home and children, she shall be eligible for a dependant's allowance?

Mr. Stanley: A case of this kind is normally met by the grant of family allowance at a special rate, which includes, in addition to the normal rates for children, an element in respect of the general expenses of maintaining the home. Where this allowance is insufficient to meet the needs of a particular

Dependants' Allowances.


—
Initial claims received since the introduction of revised conditions. Situation on 6th April.
Claims reviewed by paymasters under the revised conditions without further application. Situation on 13th April.
Renewed claims rejected previously under the old conditions. Situation on 6th April.


(a) Claims received
…
22,634
†29,460
1,853


(b) Admitted for payment
8,953*
(Payment increased) 15,820
127


(c) Rejected
…
…
9,844*
(Payment not increased) 12,086
208


(d) Under investigation
—
1,554
1,518


* These figures indicate the number paid or rejected during the period and do not necessarily relate to the number given at (a) above.


† This figure is the approximate total of the claims which can be reviewed by the paymasters without fresh application.


Separate figures for regular soldiers are not available.

Mr. Robert Gibson: (for Mr. Garro Jones) asked the Secretary of State for War whether he will take into immediate consideration the representations from the Scottish Counties and Cities Associa-

case, application for a special allowance can be made to the War Service Grants Advisory Committee.

Mr. Lipson: Would not it be fairer to treat the sister of a widower who is performing this service as a dependant in the proper sense of the term; and is my right hon. Friend aware that if, instead of having a sister, he had an unmarried wife, there would be no question of an allowance? I hope that he will reconsider the matter.

Mr. Stanley: I am looking into the matter, but the position, obviously, of a sister in such circumstances is not exactly the same as the position of an unmarried dependant living as a wife.

Viscountess Astor: Is it not wrong, and does not my right hon. Friend think it is far more important?

Mr. Tinker: asked the Secretary of State for War how many claims have been made for dependants' allowances since the revised payments were made in March; how many have been admitted; and whether any regular soldiers have been granted claims?

Mr. Stanley: With the hon. Member's permission, I will circulate a statement in the OFFICIAL REPORT.

Following is the statement:

tion urging the Government to give immediate consideration to the question of granting definite rent allowances to men in His Majesty's Forces who are householders?

Mr. Stanley: I would refer the hon. Member to the answer I gave to the right hon. Member for Kirkcaldy (Mr. Kennedy) on 14th March last.

Oral Answers to Questions — TOBACCO AND CIGARETTES (EXPEDITIONARY FORCES).

Mr. Mander: asked the Secretary of State for War whether the arrangements for the issue of cigarettes to the troops are the same in Palestine and other theatres of war as in France?

Mr. Stanley: A free issue of tobacco or cigarettes is made only in a theatre of active operations, and this does not apply to Palestine.

Mr. Mander: Is there any question of extending it to these other theatres of war from time to time?

Mr. Stanley: If it is a war theatre, but Palestine is not at the moment such an area.

Mr. Mander: Are not things almost as active in Palestine as they are in France?

Mr. Paling: In view of the fact that we are receiving an increasing number of complaints, is it not possible to do something to mitigate them?

Mr. Stanley: A great deal has been done, as I have explained to the House, through the Navy, Army and Air Force Institutes. Soldiers can get cigarettes there at a very cheap rate.

Oral Answers to Questions — QUARTERMASTERS.

Rear-Admiral Beamish: asked the Secretary of State for War whether he is aware that quartermasters of the Territorial Army who have now been embodied and are serving as full-time Regulars are not treated for promotion in the same way as Regular quartermasters; and whether he will rectify this anomaly which is the cause of hardship?

Mr. Stanley: This question is now under consideration.

Oral Answers to Questions — NORWEGIANS AND DANES (ENLISTMENT).

Major Sir Jocelyn Lucas: asked the Secretary of State for War whether he will reconsider the position of young Norwegian and Danish nationals in this country who are being refused permission to enlist in the British Army and allow them by enlisting to help the common cause?

Mr. Stanley: Norwegian and Danish nationals are eligible to enlist in the British Army under the same conditions as other aliens, subject to an examination of their credentials.

Oral Answers to Questions — ENEMY PARACHUTE LANDINGS.

Colonel Burton: asked the Secretary of State for War whether he is aware that a number of Germans have landed in Scandinavia by parachute with the object of sabotage and destruction of Norwegian lines of communication; and whether he is satisfied with the arrangements made to counteract such an occurrence in this country?

Mr. Stanley: I am aware of reports that German troops have been landed in Norway by parachute. The answer to the second part of the Question is in the affirmative.

Colonel Burton: Has not my right hon. Friend heard on the wireless of the wonderful manner in which these troops were landed by parachute, with machine guns and collapsible bicycles; and is not he aware that in a large area there is nobody at all who could possibly deal with any such landing?

Mr. Stanley: I have answered that. I said that I have heard of the reports and that arrangements have been made to counteract such landings in this country.

Colonel Burton: May I bring to the notice of my right hon. Friend that there are many areas where no arrangements have been made?

Mr. Stanley: I would be delighted if my hon. and gallant Friend would, but, of course, he would not necessarily know the arrangements made by commanders.

Colonel Burton: Is my right hon. Friend aware that there is nobody within five miles' call from my house?

Mr. Stanley: In these days of motor cars, my hon. and gallant Friend need not feel too frightened in being isolated at a distance of five miles.

Sir William Davison: Have not nearly all these German parachutists been shot down and their equipment used by those to whom they came?

Oral Answers to Questions — HUTMENTS (WIRELESS SETS).

Mr. Parker: asked the Secretary of State for War why many Army huts have


been fitted up with plugs for the use of wireless sets, which can be hired cheaply by the occupants, as the commanding officers have in many cases stated that no application for permission for wireless sets consuming electricity would be considered?

Mr. Stanley: If the hon. Member will send me particulars of any cases he has in mind, I will have them investigated.

Oral Answers to Questions — COMMANDS.

Mr. Leonard: asked the Secretary of State for War how many commands exist in Great Britain; whether they are graded first- and second-class commands; and what is the status of the Scottish Com-Command?

Mr. Stanley: There are now seven Commands at home. The differentiation into first and second class Commands is in abeyance during the war.

Mr. Leonard: Can the right hon. Gentleman state whether the personnel acting under those in command in Scotland is equal to that enjoyed by a first-class Command, and, if not, will he, in view of the importance and varied nature of the duties performed, see that this deficiency is rectified?

Captain Thornton-Kemsley: Is my right hon. Friend aware that the removal of any suggestion of inferiority would be a greatly appreciated recognition of the part that this strategically important Command is playing in the present war?

Oral Answers to Questions — SOCIAL GATHERINGS.

Mr. Charles Brown: asked the Secretary of State for War whether there is any Army regulation which prevents private soldiers and non-commissioned officers when invited to dances, dinners and social gatherings in hotels and other premises where officers are billeted from attending such functions; and whether officers would be entitled to protest against privates and non-commissioned officers attending such functions in part of premises not wholly occupied by them but within which they have accommodation?

Mr. Stanley: As has been previously stated, instructions have been issued making it clear that officers and soldiers are not prohibited from frequenting the

same clubs, hotels or restaurants. If officers are billeted in an hotel and rooms are reserved for their private use, they would be entitled to protest if anyone other than members of the mess or their guests made use of them. If, however, entertainments are held in any of the public rooms of the hotel, the fact that some part of the building is reserved for officers does not modify the instructions laid down.

Oral Answers to Questions — RECREATION GROUND, WEST LOTHIAN.

Mr. Mathers: asked the Secretary of State for War whether he will arrange for the recreation ground at a village in West Lothian, of which he has been informed, being vacated by the military unit which occupies it, seeing the village is now without any outdoor recreational facilities and there is other suitable accommodation for War Department purposes available?

Mr. Stanley: The recreation ground was occupied by the military authorities in agreement with the local civil authorities, but it has now been possible to arrange for alternative accommodation, which it is hoped will be ready in about four weeks. The recreation ground will then be vacated.

Mr. Mathers: Will it be possible for the right hon. Gentleman to arrange that in future similar cases the civil authorities will not be dealt with in the high-handed manner that was the case in this instance?

Mr. Stanley: My information, as I gave it in my answer, was that the ground was occupied by the military authorities in agreement with the civil authorities.

Oral Answers to Questions — EDUCATION SCHEME.

Mr. Creech Jones: asked the Secretary of State for War whether he has any further statement to make regarding the education scheme in the Army; whether any funds are available; and what kind of machinery has been adopted for the working of the scheme?

Mr. Stanley: I have nothing to add at present to the statement which I made in introducing Army Estimates. The Committee to which I referred has not yet submitted its report, but I hope to receive it very shortly.

Sir W. Davison: Can my right hon. Friend say what arrangements have been


made for teaching the troops French, as it is very important?

Mr. Thorne: Are the soldiers to be educated as to the cause of the war?

Mr. Stanley: A number of people have already volunteered, and certain hon. Members of this House have, I know, given addresses on that subject. If the hon. Gentleman would like to join them, he should communicate with me.

Mr. Thorne: If my education was what it ought to have been, I would willingly.

Viscountess Astor: Would the hon. Gentleman tell us what he thinks is the cause of war?

Oral Answers to Questions — CASUALTIES (COMMUNICATIONS TO RELATIVES).

Major Milner: asked the Secretary of State for War whether any decision has yet been come to as to the form of expression of regret and appreciation to be sent to relatives of the forces killed on active service?

Mr. Stanley: In addition to the Departmental communication which is made to the next-of-kin, a Royal Message of Condolence is sent in cases of death by enemy action.

Major Milner: Should there not be some more formal expression or certificate such as was granted in the last war?

Mr. Stanley: That matter is under consideration.

Oral Answers to Questions — PRINTED ACKNOWLEDGMENTS.

Major Milner: asked the Secretary of State for War whether he is aware that the printed acknowledgments now sent out, in some cases, by his Department, bear no indication of the matter or individual to whom they refer; and whether such a necessary indication may be included?

Mr. Stanley: The ordinary printed acknowledgment forms in use in the War Office provide for mention of the subject. Perhaps the hon. and gallant Member will let me know of any particular cases where an indication of the subject has not been given.

Major Milner: Is not the right hon. Gentleman aware that cards are frequently sent out—I have one here—with-

out a reference or indication as to the individual concerned? Will he look into the matter?

Mr. Stanley: I have said that a space is there to be occupied and should be filled in. If the hon. and gallant Gentleman will give me any cases where this has not been done, I should like to look into them.

Oral Answers to Questions — EXPEDITIONARY FORCE (SCOTTISH BANKNOTES).

Lieut.-Colonel Sir Thomas Moore: asked the Secretary of State for War whether he will issue instructions that Scottish banknotes shall be accepted as currency and without restrictions by all British paymasters and official or semi-official institutions with the British Expeditionary Force?

Mr. Stanley: Instructions will be issued for Scottish banknotes to be accepted at their face value by field cashiers for exchange into francs for troops of the British Expeditionary Force, in the same way as English banknotes. I understand that the Navy, Army and Air Force Institutes and other organisations accept these note sat their face value.

Oral Answers to Questions — JUTE TENTERS AND UNDER-TENTERS.

Mr. Foot: asked the Secretary of State for War how many applications have been received for the release from their military duties of tenters and under-tenters, whom it is desired to re-engage in the jute industry; and how many of such applications have been granted?

Mr. Stanley: I regret that the information asked for is not readily available.

Mr. Foot: Is the right hon. Gentleman aware that employers have experienced great difficulty in this matter, and is he satisfied that in every case the special qualifications of men are being utilised?

Mr. Stanley: I have devoted a great deal of attention in the last few weeks to seeing that skilled men in the Army are used in positions where special skill is available.

Mr. Foot: May we take it that any future applications from employers will be sympathetically considered?

Mr. Stanley: Applications are always sympathetically considered, but I cannot promise that they can always be granted.

Oral Answers to Questions — ORDNANCE DEPOT, KINNEGAR (LABOURERS' WAGES).

Dr. Little: asked the Secretary of State for War whether he is aware that the labourers in the Royal Army Ordnance Corps Department, Kinnegar, Holywood, County Down, who are ex-Servicemen, have received only 1s. per week increase in wages since the outbreak of war; and whether, in view of the increased cost of living, he will consider the case of these men engaged in necessary work, and allow them a bonus similar to that given to Royal Army Ordnance Corps workers employed in Great Britain?

Mr. Stanley: Labourers employed in the Ordnance Depot at Kinnegar have, in common with similar employés in the majority of Ordnance Depots in Great Britain, been granted an increase of 4s. a week as from the beginning of the pay week in which 22nd February fell. Instructions to this effect were issued on 5th April.

Dr. Little: Can my right hon. Friend say the date on which the bonus of 4s. was granted? I have had a letter from a representative of these labourers stating that they, have received only 1s. a week since the beginning of the war.

Mr. Stanley: Perhaps the hon. Gentleman will send me the case. My information is that instructions were issued on 5th April and that payments were back dated to 22nd February.

Oral Answers to Questions — PALESTINE (PARCELS).

Captain Strickland: asked the Secretary of State for the Colonies whether it has yet been found possible to make arrangements that parcels, when consigned to members of His Majesty's Forces stationed in Palestine, may be delivered duty free?

The Secretary of State for the Colonies (Mr. Malcolm MacDonald): I would refer my hon. Friend to my reply to a Question by my hon. Friend the Member for South Nottingham (Mr. Markham) on 16th April, in which I stated that I was in communication with the High Commissioner as to the possibility of granting some duty concession on parcels sent to members of His Majesty's Forces serving in Palestine. I am awaiting the High Commissioner's views on the subject.

Captain Strickland: Am I to gather from that reply that my right hon. Friend is sympathetic to the idea?

Mr. MacDonald: I think my hon. and gallant Friend had better await the final decision when I have considered the circumstances as presented by the High Commissioner.

Mr. T. Williams: May we expect that the reply from the High Commissioner will be much speedier than usual?

Oral Answers to Questions — AUXILIARY TERRITORIAL SERVICE.

Mr. Thorne: asked the Secretary of State for War how many of the four highest ranks of the Women's Auxiliary Territorial Service are titled ladies and how many not titled; and how many titled ladies there are in all higher ranks and how many not titled?

Mr. Stanley: As regards the four highest ranks, there are two chief controllers, namely, Her Royal Highness the Princess Royal and Dame Helen Gwynne Vaughan; there are at present no senior controllers or controllers; and there are 26 chief commandants, of whom seven have titles and 19 have not. The only other senior officers are those with the rank of senior commandant, of whom there are 49, 13 with titles and 36 without titles.

Mr. Thorne: Is the Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor) one of them?

Brigadier-General Sir Henry Croft: Is not it a fact that several of these ladies are only titled because of the recognition of their great services in the last War?

Oral Answers to Questions — SCOTLAND.

SERVICE ACTIVITIES (JOURNALISTIC FACILITIES).

Mr. Woodburn: asked the Secretary of State for Scotland whether his attention has been called to the assault committed on a photographer member of the National Union of Journalists at Waverley Station, Edinburgh, on 10th March, where he attended at the invitation of the Scottish Ministry of Information to take certain photographs, and where he was struck to the ground, suffering personal injury and


damage to his clothing and camera; and, in view of the several incidents of violent resentment which have occurred in Scotland against Press representatives carrying out duties assigned to them, what steps he proposes to take to ensure that, when acting on the official invitation of the Ministry of Information, Service Departments, or in the course of their ordinary duties, such Pressmen will not be molested by Service, police, railway or other officials?

The Minister of Information (Sir John Reith): I have been asked to reply. My attention was called to the incident. I understand that an explanation and apology have been given by the railway authorities to the journalist concerned. As regards the second part of the Question, I would refer to the reply which I gave on 10th April to the hon. Member for West Fife (Mr. Gallacher).

Mr. Woodburn: Would the Minister take steps to consult with other Departments so that the card which is given to journalists, enabling them to take official photographs, will be recognised by all Departments, because there has been a series of unfortunate incidents of this kind which have caused great distress among Pressmen in Scotland?

Sir J. Reith: Yes, Sir. I am glad to be able to tell the hon. Member that negotiations are in progress now with all Departments concerned with just such an end in view as he mentions.

Oral Answers to Questions — ALLOTMENTS.

Sir Murdoch MacDonald: asked the Secretary of State for Scotland whether he is aware that the number of applicants for allotments is not as great as might reasonably be expected; and whether he will take steps, in conjunction with the Minister of Labour, to remedy this in view of the large number of unemployed still on the register?

The Secretary of State for Scotland (Mr. Colville): While there is an increase of from 60 to 70per cent. since the beginning of the war in the number of allotments on land provided by local authorities in addition to an increase in the number of allotments on private ground, it is desirable that a further increase should be secured. I have recently appointed a committee representative of all interests concerned to

encourage by all practicable means the production of food on allotments and private gardens. I have had the assistance of the Ministry of Labour's Exchanges in bringing the need for allotments to the notice of unemployed men.

Oral Answers to Questions — HIGHLANDS (SHEEP REARING).

Sir M. MacDonald: asked the Secretary of State for Scotland what steps he has taken to give effect to the recommendation for a full inquiry into the cause of the fall in the sheep-carrying capacity of Highland pastures, as suggested to him by the Scottish Land and Property Federation in their letters to his Department of Agriculture dated 30th January and 23rd February last?

Mr. Colville: A sub-committee of the Scottish Agricultural Advisory Council has been set up to consider and make recommendations regarding the stocking of hill grazings. This investigation covers not only the causes of any fall in sheep-carrying capacity but also the possible steps which could be taken to increase the stocking capacity of such lands. The whole question of pastoral improvement was also the subject of discussion at a conference this month convened by the Department of Agriculture for Scotland and attended by representatives of the agricultural colleges in Scotland and other experts on this subject.

Sir M. MacDonald: Can the Minister fix a time for this report?

Mr. Colville: No, Sir, I cannot fix a time. The committee have now been sitting for several weeks, and I hope they will be able to give me a report before long.

Oral Answers to Questions — WAR CHARITIES.

Mr. Leonard: asked the Secretary of State for Scotland whether he will inquire as to the number of voluntary collecting agencies operating in Scotland with the object of sending comforts and parcels to His Majesty's Forces; and whether he will take steps to require such organisations to publish their on cost charges in rent, wages, etc., and the value of the goods forwarded to the Forces?

Mr. Colville: It is proposed to introduce at an early date a Bill on similar lines to those of the War Charities Act


of 1916 with the object of establishing control over all appeals to the public on behalf of war charities.

Mr. Leonard: Can the right hon. Gentleman say when he will have the Bill?

Mr. Colville: In the course of next week.

Oral Answers to Questions — HOUSING.

Mr. T. Henderson: asked the Secretary of State for Scotland how many subsidised working-class houses were built and completed in Scotland in 1939, and of the total number, how many were poured or block concrete, and how many of timber construction?

Mr. Colville: 19,170 subsidised working-class housese were completed in Scotland in 1939. Of these, 1,218 were of concrete, and 220 of timber, construction.

Mr. Henderson: asked the Secretary of State for Scotland whether his Department has experienced any difficulty in obtaining brick, cement or timber in the building of subsidised working-class houses; and, further, whether he can state the estimated cost of house construction by these materials, respectively, at the present time?

Mr. Colville: Present and prospective works essential to the war effort must have a prior claim on the supplies of the materials referred to and this consideration imposes especially rigid restrictions upon the extent to which timber in particular can be released for housing purposes. In present circumstances no accurate estimate can be made of the relative costs of house construction by these materials.

Mr. R. Gibson: asked the Secretary of State for Scotland the number of houses completed in Scotland from 1st January,1940, to the last available date; how many houses are still under completion; and what were the comparable figures for 1939?

Mr. Colville: The information asked for is not yet available. I will communicate with the hon. and learned Member as soon as it has been received.

Mr. Gibson: From the information which the right hon. Gentleman has, is he satis-

fied with the progress that is being made, and will he keep in mind the continued shortage of houses in Greenock?

Mr. Colville: I am awaiting the information, and will let the hon. and learned Member have it.

Mr. Mathers: Will the Secretary of State endeavour to make these statistics public as well as communicating them to the hon. and learned Member?

Mr. Colville: My intention was to allow the hon. and learned Member to have the information, as he has asked for it, and put a further Question down.

Oral Answers to Questions — NATIONAL WAR EFFORT.

Mr. Shinwell: asked the Prime Minister whether, in view of the possibility of the present conflict extending in other directions and the nature of the task involved, he has under consideration, while safeguarding the liberties of the people to the utmost extent, the organisation of the whole nation for the war effort, including the full mobilisation of labour and all other resources, the provision of adequate supplies, extended rationing and the curtailment of all non-essential consumption; and whether he will take the first available opportunity of informing hon. Members on the actual position?

The Lord Privy Seal (Sir Kingsley Wood): I have been asked to reply on behalf of the Prime Minister. The questions referred to are continuously under the consideration of the Government. A large number of measures for the purposes indicated have been already put into force, and further measures will be taken as circumstances require and our war effort develops. Many Government Departments are concerned, and Ministers are at all times ready to give hon. Members the fullest possible information consistent with the public security.

Mr. Shinwell: As the right hon. Gentleman has replied for his right hon. Friend could he indicate which particular item mentioned in the Question he has under his personal consideration?

Sir K. Wood: The hon. Gentleman had better give me notice of that question.

Mr. Shinwell: Do I understand from that reply that the right hon. Gentleman requires notice in order to inform hon. Members of the task upon which he is employed at the moment?

Sir K. Wood: No, Sir, but a full announcement was made on that particular matter a few days ago.

Oral Answers to Questions — NON-TRADING CORPORATIONS (TAXATION).

Mr. Liddall: asked the Chancellor of the Exchequer whether he will examine the feasibility of raising revenue by collecting at repeated intervals of 15 years a notional equivalent of Death Duties upon the real and personal property of non-trading corporate bodies whose possessions, not passing at death, are not subject to Death Duties and whose beneficiaries therefore escape direct or indirect Death Duties as a contribution towards national expenditure?

The Financial Secretary to the Treasury (Captain Crookshank): I would remind my hon. Friend that bodies corporate or unincorporate not established for trade or business are already subject, where not specifically relieved, to Corporation Duty imposed by the Customs and Inland Revenue Act, 1885.

Oral Answers to Questions — NORTHERN IRELAND (IMPERIAL CONTRIBUTIONS).

Mr. Logan: asked the Chancellor of the Exchequer whether he can give the total of the Imperial Contributions paid by the Government of Northern Ireland from 1921 to date; also the payments made by the Government to the Government of Northern Ireland, including grants in respect of the special constabulary and malicious injuries, the provision of new buildings, unemployment insurance and all other payments by the Imperial Exchequer?

Captain Crookshank: As the answer is long and contains a number of figures, I will, with the hon. Member's permission, circulate it in the Official Report.

Following is the answer:

The total amounts are—Imperial Contributions by the Government of Northern Ireland, £30,787,000; payments by the

Imperial Government to the Government of Northern Ireland, £22,300,000. The Imperial Contributions for the last two financial years which are included in the first figure are provisional and are subject to adjustment by the Joint Exchequer Board in the light of actual figures of revenue and expenditure for those years. The second figure does not include the amount (approximately £656,000 a year) collected from tenants and retained by the Government of Northern Ireland under Section 26 of the Government of Ireland Act, 1920, in respect of land purchase annuities under agreements entered into before the passing of the Act. (An equivalent sum is paid as a non-recoverable charge out of the Imperial Exchequer to the National Debt Commissioners.) The answer to the second part of the Question is that the payments to Northern Ireland include the following:

£


Special constabulary
6,492,500


Malicious injuries
2,000,000


Provision of new buildings
2,481,800


Unemployment insurance
10,287,100


Special initial expenses
438,300


Payments from Vote of Credit
600,000

Oral Answers to Questions — CHARITABLE TRUSTS (TAX REMISSION).

Mr. McEntee: asked the Chancellor of the Exchequer (1) whether in any cases a charitable trust is used by a limited liability company to obtain remission of taxation on gifts given by the company for charitable purposes;
(2) what steps are taken by the Inland Revenue Commissioners to assure themselves that moneys given under charity trusts do in fact reach the charity named in the donor's draft;
(3) whether he is aware that there are persons with charitable trusts who, while professing to make gifts there out to genuine charities, and thereby obtaining the tax remissions in respect of such gifts, are in fact diverting the money from the genuine charities named in their drafts to other objects, not charities, within the meaning of Section 37 of the Income Tax Act, 1918; and what steps he is taking to prevent a continuance of this illegal practice?

Captain Crookshank: My right hon. Friend is not aware of any case in which


a company has created or used a charitable trust for the purposes suggested by the hon. Member in his first Question. With regard to the exemption from Income Tax allowed to a charitable trust, he is informed that the Inland Revenue authorities assure themselves, in the first place, by examination of the documents establishing the trust that it is properly constituted for charitable purposes, and of course they obtain evidence by way of vouchers or otherwise showing the title of the trust to the income received by it and showing that the income has been taxed. Before repaying tax the authorities similarly require to be satisfied as regards the application of the income of the trust, but I may point out that the disbursement of the moneys of the trust in accordance with the terms of the trust is a legal duty which rests on the trustees and it is no part of the duties of the taxation authorities to supervise the administration of charitable trusts. Their duty is to satisfy themselves in connection with any claim to repayment of tax made by a charitable trust that the account of the trustees' expenditure is supported by proper evidence in the form, for example, of certificates by persons acting in an official capacity on behalf of a charity that the sums paid to them by the trustees have been or will be applied for charitable purposes.

Mr. McEntee: Is the right hon. and gallant Gentleman aware that many of these trusts are issued through vouchers, as they are called, under which the money is supposed to go to certain legitimate charities but, in fact, goes to purposes other than charities; for instance, that loans for private persons are used for the purchase of goods and not for charity? What steps are being taken to stop this practice?

Captain Crookshank: I am not aware of these facts. I have explained to the House what is the present position, but if the hon. Gentleman has any specific case he would like to send me, I will be glad to look into the details.

Mr. McEntee: Is the Financial Secretary aware that I have already sent a large number of cases to the Chancellor of the Exchequer and that others are under investigation? I am asking what steps are being taken to stop it.

Oral Answers to Questions — BONUS SHARES.

Mr. John Wilmot: asked the Chancellor of the Exchequer, whether he is aware that, during the period September, 1939, to March, 1940, over £10,000,000 of company profits was distributed by way of sterling bonus share issues; and whether he will take steps to prevent the avoidance of Surtax by wealthy holders by reason of the fact that the proceeds of the sale of such scrip is not returnable as income for Surtax purposes?

Captain Crookshank: Precise statistics are not available, but I can assure the hon. Member that my right hon. Friend has the question of bonus shares in mind and it is not being overlooked.

Mr. Wilmot: While thanking the Financial Secretary for the answer, is he not aware that statistics can be obtained from the Stock Exchange authorities, and that an examination of the figures will show that the issue of bonus shares has grown to such proportions that it amounts to over one-third of the total issue made since the war? Will he take energetic steps to stop Surtax evasion on this widespread scale?

Mr. Dalton: If the Financial Secretary is incapable of answering the Question, will he consider whether the issue of bonus shares to rich shareholders is not a disgraceful exhibition of war-time profiteering?

Oral Answers to Questions — CURRENCY (METRIC SYSTEM).

Mr. Butcher: asked the Chancellor of the Exchequer whether he is aware of the difficulties caused to Franco-British Commerce and intercourse by the present structure of the English monetary system; and whether, with a view to assisting easy conversion of the currencies of England and France, he will examine the possibility of converting the English currency to a metric system by increasing the value of the penny to one-tenth part of a shilling?

Captain Crookshank: In my view no appreciable difficulties are caused to Franco-British commerce and intercourse by the fact that our currency is not on a decimal basis, and I am unwilling, particularly at the present time, to re-open the question.

Oral Answers to Questions — LOCAL AUTHORITIES (LOANS).

Mr. Pethick-Lawrence: asked the Chancellor of the Exchequer whether, in view of the fact that in certain cases of municipal borrowing contributions are made by Exchequer grants towards the annual cost of the loans, he will, pending general removal of the ban on conversion, have each case examined on its merits in order to reduce the expenditure for interest out of public funds?

Captain Crookshank: I am aware that the Exchequer contributes towards the cost of certain services which were financed by municipal loans, but for the present wider considerations must prevail. On the general position of these loans, I cannot add anything to the reply which I gave to the right hon. Gentleman on 2nd April.

Mr. Pethick-Lawrence: If I send the Chancellor of the Exchequer some individual particulars, can I be assured that die right hon. Gentleman, when the immediate Budget is over, will consider them?

Captain Crookshank: I am sure my right hon. Friend will do so, but if he has not the time, I will consider them.

Oral Answers to Questions — GOVERNMENT ORDERS AND REGULATIONS (PUBLICATION).

Mr. Foot: asked the Financial Secretary to the Treasury whether his attention has been drawn to the difficulty experienced by many persons and organisations in becoming familiar with the terms of all the orders and regulations affecting themselves and the trades or callings in which they are engaged; and whether he will bring to the attention of the Departments principally concerned the desirability, when they issue new orders or regulations, of notifying all organisations whose members are likely to be affected, and also, where practicable, of consulting with such organisations before such orders or regulations are finally brought into force?

Captain Crookshank: I think the hon. Member exaggerates the difficulty. Departments responsible for the issue of Statutory Rules and Orders already circulate particulars thereof as a general practice to the trade journals concerned, to the trade associations interested, and

in many cases to individual firms. In addition, where the subject matter is of general interest arrangements are made for publicity in the general Press. Consultation with trade organisations also takes place wherever it is appropriate.

Mr. Foot: Is the Financial Secretary not aware that many organisations, particularly organisations of retail traders, find a great difficulty in keeping abreast of all the orders and regulations which affect their trade?

Captain Crookshank: We do our best to deal with the matter, as I have indicated in my reply.

Colonel Nathan: May I ask whether, in order to insure the information of the public, the right hon. and gallant Gentleman will take into consideration the question of seeing that these orders and regulations are in print and available at the Stationery Office within a few days of their notification by the Government?

Captain Crookshank: I think that is the case now. There was some difficulty in the early stages of the war, but I think it has been rectified.

Sir Herbert Williams: Will my right hon. Friend also take steps to see that these orders are written in a language which ordinary people can understand?

Captain Crookshank: "Ordinary people" is a very wide term.

Oral Answers to Questions — PLANET PROPERTIES COMPANY.

Mr. Tinker: asked the Minister of Agriculture whether he is aware that the Planet Properties Company, who have acquired land in the townships of Windle and Eccleston, have let it get in a derelict condition; that they have been notified by the Lancashire County War Agricultural Committee to put it in cultivation but nothing has been done; and, seeing the urgent need for all such land to be made use of, will he take steps to have it attended to?

The Minister of Agriculture (Colonel Sir Reginald Dorman-Smith): I am informed that the present owners of the land referred to have now arranged with the farmer who previously had the land, to plough it. One field has already been ploughed and prepared for sowing, and the rest will be ploughed as soon as possible.

Oral Answers to Questions — EDUCATION (FACILITIES, LIVERPOOL).

Mr. Logan: asked the President of the Board of Education whether, in view of the unsatisfactory state of educational facilities for school children in the elementary schools of the North end of the city of Liverpool, he will investigate the position, and, if possible, arrange adequate school time for these children?

The President of the Board of Education (Mr. Ramsbotham): The geographical position of the northern portion of the dockside district and the condition of some of the schools in it have presented special difficulties in a resumption of school attendance. As the result of a recent special investigation by a representative of the Ministry of Home Security, in consultation with the Regional Commissioner, proposals have now been made which should enable most of the public elementary schools to be reopened. Only seven schools, of which three are in the northern end of the district, are not recommended for reopening, by reason either of their specially vulnerable position or of their structural condition.

Mr. Logan: With the exception of the schools that are not to be opened, is it possible to reopen all the schools on dock-side which are able to give education to children?

Mr. Ramsbotham: I am anxious that every school that can be opened shall be opened.

Oral Answers to Questions — FOOD SUPPLIES (EGGS).

Mr. Thorne: asked the Parliamentary Secretary to the Ministry of Food whether he is aware that the price of selected eggs rose on last Tuesday as much as 7d. a dozen and 6½d. for first-grade eggs; and what action he intends taking about the matter?

The Parliamentary Secretary to the Ministry of Food (Mr. Lennox-Boyd): I am informed that the average increase of price in country markets on the date in question amounted to 3¾d. per dozen and in the London area to 3d. per dozen. With reference to the last part of the Question I would draw the hon. Member's attention to the announcement made yesterday that having regard to the present supply of home-produced eggs, there is no reason why retail prices should exceed 2s. 3d.

per dozen for eggs of standard grade, and that if it should be found necessary, the control of prices of home-produced eggs will be reintroduced.

Oral Answers to Questions — ALIENS.

Sir T. Moore: asked the Secretary of State for the Home Department whether he is satisfied that every proper step is being taken to ensure that the 74,000 aliens in Great Britain do not contain any who are a danger to the internal or external security of our country?

The Under-Secretary of State for the Home Department (Mr. Peake): As my hon. and gallant Friend is aware, the case of every German and Austrian in this country has been reviewed by the local tribunals, and a further review of certain categories of aliens is at present being undertaken by Advisory Committees appointed for each Civil Defence Region. The onus is on every person of German or Austrian nationality to show cause why he should not be interned, and the policy is to intern any German or Austrian if there is doubt as to his attitude and disposition towards the Allied cause.

Sir T. Moore: While thanking my hon. Friend for the information he has given, will he bear in mind that there is a considerable amount of public disquiet at the moment on this subject, especially in view of the revelations from Norway?

Miss Rathbone: Is it not a fact that the danger in Norway arose largely from Norwegians and not from aliens?

Colonel Burton: asked the Home Secretary whether he is aware that on the arrival of Germans in Norway they were received by a number of friendly members of the Nazi organisation; and whether he is satisfied that satisfactory arrangements exist to prevent any such occurrence in this country?

Mr. Peake: Members of the Nazi organisations in this country were interned on the outbreak of war; and if my hon. and gallant Friend fears that amongst those who control our defences there may be persons who would facilitate the landing of a German expeditionary force, I can only say that my right hon. Friend does not share his apprehension.

Colonel Burton: Would it not be far better to intern all the lot, and then pick out the good ones?

Mr. Mander: May I ask the hon. Gentleman whether, in his reply, he was referring to British members of Nazi organisations as well as refugees?

Mr. Peake: I was referring both to German and British members of Nazi organisations.

Mr. Thurtle: Will the hon. Gentleman convey to his right hon. Friend that the people of this country are very anxious that our war effort should not be hampered either by Quislings of the Right or Kuusinen of the Left?

Mr. Gurney Braithwaite: Is it not time that Sir Oswald Mosley was interned?

Mr. Peake: There is no evidence in our possession to show that Sir Oswald Mosley is a member of a Nazi organisation.

Mr. Dalton: What is the British Union?

Mr. Braithwaite: Was not this gentleman Chancellor of the Duchy of Lancaster in a Government of this country?

Oral Answers to Questions — CYPRUS (COMPANIES, REGISTRATION).

Mr. John Wilmot: asked the Secretary of State for the Colonies what is the number of companies registered in Cyprus during the six months September, 1939, to March, 1940, and in the similar periods of the years 1937–38 and 1938–39; now many of such companies are investment companies; whether they are regarded as non-resident for the purpose of the Defence (Finance) Regulations; and whether the holdings of such companies of American securities are being requisitioned with those of companies domiciled in Great Britain?

Mr. M. MacDonald: I have not the figures asked for in the first parts of the Question, but I am inquiring of the Governor of Cyprus. Companies registered in Cyprus would normally be regarded as resident there in the absence of any special circumstances which may affect individual concerns. Foreign securities held by residents in the Colonies have not been requisitioned, but they may not be disposed of without Government approval.

Mr. Wilmot: While thanking the right hon. Gentleman for his reply and while awaiting the figures which he has promised to get, may I ask whether he is aware that this method is used by unpatriotic people to avoid the requisitioning which falls upon others and by other sorts of people to transfer assets into enemy hands?

Mr. MacDonald: If the hon. Gentleman will give me any information he may have which he regards as relevant, I will very gladly consider it.

Colonel Nathan: Will the right hon. Gentleman take into consideration the making—if they are not already made—of Defence Regulations in Cyprus bearing on this point in the same way as Regulations exist in the neighbouring territory of Palestine?

Mr. MacDonald: I think the answer I have given covers the position fully. The matter is under consideration.

Oral Answers to Questions — UNEMPLOYMENT, CROYDON (GOVERNMENT CONTRACTS).

Sir H. Williams: asked the Minister of Labour whether he is aware that, despite the large numbers serving in the Forces and on full-time air-raid precautions, unemployment in Croydon has risen from 5,344, on 13th March, 1939, to 6,711 on 11th March, 1940; and what steps are being taken to spread Government contracts more evenly so that the unemployment in areas adversely affected by the war may be reduced?

The Parliamentary Secretary to the Ministry of Labour (Mr. Assheton): I am aware of the figures quoted by my hon. Friend: the matter raised in the latter part of the Question is one which is receiving the attention of the Area Boards and Area Advisory Committees established by my right hon. Friend the Minister of Supply.

Oral Answers to Questions — BUILDING SOCIETIES (MORTGAGE INTEREST).

Mr. Simmonds: (for Sir Smedley Crooke)asked the Financial Secretary to the Treasury whether he is aware of the growing indignation felt by owner-occupiers, many of whom are ex-service


men, by the calling-in of mortgages by certain building societies for the purpose of increasing the interest; and whether he will consider the advisability of taking steps to amend the Rent and Mortgage Interest Restrictions Act, 1939, to protect these owner-occupiers from unreasonable treatment?

Captain Crookshank: I am aware of the action to which my hon. Friend refers, though I understand that it will have the effect of leaving the periodical payment sun changed but extending the time over which those payments were made. As regards the second part of the Question, I would refer to the reply given by my right hon. Friend the Minister of Health on 20th March to my hon. Friend the Member for Tamworth (Sir J. Mellor).

Mr. Simmonds: Has my right hon. and gallant Friend seen the very strong resolution that was passed by the Birmingham Corporation on this subject, and will he not reconsider the very serious social consequences of this change?

Captain Crookshank: Yes, Sir. I have seen the resolution, but I have nothing to add to the answer I have given.

Mr. Noel-Baker: Is the right hon. and gallant Gentleman satisfied that these societies acted within their legal rights?

Captain Crookshank: I should require notice of that question.

BUSINESS OF THE HOUSE.

Ordered,
That the Proceedings on Government Business be exempted at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[Sir J. Simon.]

FINANCIAL STATEMENT (1940–41).

Copy ordered, "of Statement of Revenue and Expenditure as laid before the House by Mr. Chancellor of the Exchequer when opening the Budget."—[Captain Crookshank.]

Copy presented accordingly; to lie upon the Table, and to be printed. [No. 114.]

MESSAGE FROM THE LORDS.

That they have agreed to,—

Newcastle and Gates head Waterworks Bill, without Amendment.

Staffordshire and Worcestershire Canal Bill,

Wessex Electricity Bill, with Amendments.

Preamble

The House met at a quarter before Three of the Clock, Mr. SPEAKER in the Chair.

Orders of the Day — WAYS AND MEANS.

Considered in Committee.

[Sir DENNIS HERBERT in the Chair.]

Orders of the Day — FINANCIAL STATEMENT.

3.39 p.m.

The Chancellor of the Exchequer (Sir John Simon): Seven months ago, in the Emergency Budget necessitated by the outbreak of war, I presented to the Committee estimates of what was likely to be our total expenditure in the year ending 31st March last, and of how much out of that total expenditure we might hope to find by taxation. In the abnormal conditions which existed at that time, it was not to be expected that the figures could be very precisely foretold: indeed, as regards the expenditure, all I could do was to add to the total of expenditure already approved the round sum of a Vote of Credit for £500,000,000 authorised to be spent before the end of the year. I warned the Committee that it was uncertain whether this first Vote of Credit would be sufficient to cover all our expenditure until the end of the year. It has turned out that this Vote of Credit has been under-spent by nearly £100,000,000—by £91,500,000, to be precise.
I notice that it has been assumed in some quarters, by some critics, that this under-spent residue of the Vote of Credit indicates a delay on the part of the Services, engaged in the war effort, in carrying through their programme. I do not think that criticism is entirely fair, for this reason. It assumes that we were able to estimate as accurately as we could by ordinary Estimates, and it fails to take into account the difference between the closely checked figures of Departmental Estimates, submitted to and passed by the House, and the broad generalities of a Vote of Credit, which was primarily designed at the time to authorise whatever expenditure came to be met down to the end of the financial year. At the same time I am quite willing to admit that the rapid increase of our war strength is the thing which matters most, and that the reduction in last year's expenditure below what was thought possible seven months ago cannot be judged on

an occasion like this by ordinary peacetime standards.

Orders of the Day — EXPENDITURE AND REVENUE, 1939–40.

The figures are these: The actual expenditure last year comes out at a total of £1,816,873,000, instead of the Emergency Budget estimate of £1,933,341,000. There is thus a saving under various heads in last year's expenditure amounting in the whole to no less than £116,500,000.

On the other side of the account, at any rate, we may fairly allow ourselves some degree of enthusiasm. The Revenue estimates, which amounted to £995,000,000 odd, have been exceeded in fact by £54,000,000—over £1,000,000 a week. That is a most heartening result. As the Blue Paper shows, there are several heads in regard to which, in a Johnsonian phrase, cheerfulness may be allowed to break in. The Income Tax and Surtax payers have behaved nobly in paying up so promptly the increased sums demanded of them, and my estimates of last September both for Income Tax and Surtax have been fulfilled practically precisely. I know from many letters I have received on this subject that these direct taxpayers, often citizens of quite modest incomes, made a very special effort to comply with the first request for payment, because they realised how important it was to respond to the appeal I made that the proceeds of the tax should reach the Exchequer as soon as possible. Perhaps I may be permitted to give one brief example without quoting the name or identifying the locality. An invalid taxpayer, living in the North—I will not say how far North—in the bleak and snowy days of January, sent his tax, which amounted in his case to some £13,by the hand of his wife; in the rough weather, on foot, she went to the office of the collector in a town several miles away. He wrote to me the next day in a state of some distress and indignation because, in spite of his efforts to contribute thus punctually to the country's needs, the lady arrived after the office was closed. A fine sense of duty is demonstrated by a case of that sort and goes far to explain the success of this part of our system.

May I call the attention of the Committee to a very remarkable thing, namely, that £390,000,000 has been produced by Income Tax in a single year.


It is a huge sum, and it is the largest amount Income Tax has ever yielded in a single year. The Committee might be interested to have a comparison. How much was collected by way of Income Tax in the first year of the last war? The Committee will notice that then the fiscal year contained eight months of war and not seven months, because the war began in August and not in September. In the first year, 1914–15, the total Income Tax collected was £59,000,000, as compared with £390,000,000. Take another contrast. Last year Surtax produced £69,750,000, whereas Super-tax in 1914–15 produced £10,000,000.

Hon. Members will observe the other figures, and I will run over them very quickly. Death Duties are over £2,000,000 above the estimate, and the National Defence Contribution comes out at nearly £27,000,000, whereas I estimated for £25,000,000 in this case. The Excess Profits Tax from which, as I explained in my Budget speech last September, any considerable revenue during the year was most unlikely, has already contributed its trickle of £40,000. Inland Revenue duties as a whole have provided £583,000,000, instead of the estimate of £578,750,000.

Customs and Excise have produced £400,000,000, which is £27,500,000 more than the estimate. There is a very noticeable fact about the total. This surplus is chiefly due to the exceptionally large yield from articles on which I increased the duty last time. From the fiscal point of view, therefore, the choice of commodities was more than justified. For example, tobacco has produced £9,700,000 more revenue than my advisers expected, in spite of the increase in tax, spirits £1,700,000 more, sugar £4,600,000 more, and beer £750,000 more.

The most striking case of unexpected yield is furnished by the Motor Vehicle Duties. A year ago, when I ventured to increase the licence duty on private cars up to 25s. per horse-power, there were many who prophesied that I should suffer a disastrous loss of revenue. I admit that when the war came in September, the new conditions—the black-out, the rationing of petrol, the appeal to avoid unnecessary spending—naturally required a revision of the estimates. In my War Budget I put my estimated yield from Motor Vehicle Duties at £22,000,000. In fact, these duties have produced

£34,000,000. The receipts from private motor cars for December, January and February last were over £10,500,000, which is £134,000 more than they were in those months in the previous year. We have preserved the revenue while we have discouraged luxury motoring. There is one thing more which is very remarkable. Usually when the private motorist pays his tax and takes out his licence in January he takes it out for the year, and the way in which our accounts are kept gives the whole of that money to the receipts for January. This year a large number of people have taken out the licence for three months only, and therefore the amount received is all the more remarkable.

Although the receipts from the Post Office exceeded the September Estimate, the total contributions from Post Office revenue and the balance remaining in the Post Office Fund taken together provided only about half of the fixed contribution of £10,750,000 under the pre-war arrangement. I shall have to refer to this arrangement later.

Other sources of revenue produced £6,500,000 more than was estimated, the principal reason for the excess being the additional profits resulting from the increase of stocks of silver coin throughout the country. In that connection, I am glad to find that although postal orders were made legal tender in September as a precaution against a shortage of silver coin, only very limited use had to be made of them for currency purposes in the early days of the war. It was possible to revoke their status as legal tender in December.

Summing it up, we spent £1,817,000,000; we found out of revenue £1,049,000,000, and we borrowed the rest, £768,000,000. As the Estimates placed before the Committee in September indicated we might have to borrow last year £938,000,000, this is a good deal better than might have been expected, and I invite the Committee to take such comfort as they can from the results of last year, for the much graver problem of the immediate future is still to be dealt with.

Orders of the Day — NATIONAL DEBT.

Before I come to this problem, I must occupy a few minutes in making a short statement to inform the Committee how


the National Debt stood at the end of last year. Although the subject is technical, I think it is of interest. We borrowed last year not only to cover that deficit of £768,000,000 which I have just mentioned, but also to find £4,250,000 to make up the balance of the statutory Sinking Funds of £11,250,000; we borrowed also £7,000,000 for issues under the Anglo-Turkish (Armaments Credit) Agreement Act, 1938, the Overseas Trade Guarantee Act, 1939, and the North Atlantic Shipping Act, 1934. In the result the National Debt, which was £8,163,000,000 at the beginning of the year, had increased to £8,931,000,000 on 31stMarch. £569,000,000 of the new borrowing arose by additions to the floating debt; £99,000,000 arose on account of the first proceeds of the £300,000,000 Three per cent. War Loan. As hon. Members will recall, 10 percent. of it was to be paid on application, and there was the alternative to pay up the whole amount at once. Last year we received £99,000,000. The remaining proceeds of the Loan will fall into the accounts of the present financial year.

There is another figure which I must ask the Committee to note. No less a sum than £122,000,000 was received last year from the new Savings Certificates and Defence Bonds—a very striking result for the first four months of the War Savings campaign. Thanks to that campaign, receipts from Savings Certificates and Defence Bonds during the year exceeded the amount of certificates repaid by £109,000,000. Miscellaneous sources of borrowing accounted for nearly £2,000,000, among which I must mention about £400,000 in loans free of interest from a number of public spirited citizens, in both small and large amounts; and £570,000 received under the arrangement by which the Government of Northern Ireland agreed to relend to the Imperial Government 75 per cent. of the proceeds of the sale of Ulster Savings Certificates.

Although it does not enter into the debt figures for 1939–40, I would like to remind the Committee that in February last we made provision for dealing with the 4½ per cent. Conversion Loan 1940–44 which the Treasury gave notice to repay on 1st July next. The amount of that loan outstanding was £350,000,000.

Holders were offered the alternatives to convert it into a loan of 2 per cent. or, if preferred, to have their holding repaid. What happened? Of that loan, £245,000,000 will be converted into the 2 per cent. Conversion Loan; £105,000,000 is to be repaid in cash, and as the balance I have just received from the 3 per cent. Loan comes to some £200,000,000, I enter the new financial year, with all its difficulties, with the prospect of nearly £100,000,000 net in hand, as the joint result of the issue of the 3 per cent. Loan and of the 4½ per cent. Conversion operation. Even when we are dealing with these very vast sums, £100,000,000 is something to be considered and when we come to measure and endeavour to meet the burdens of the present year I shall be glad to remind the Committee of this trifle of £100,000,000.

Orders of the Day — ESTIMATED EXPENDITURE, 1940–41.

Now I turn to the problems of the new year. Of course, the Committee will at once see that a large part of the usual material for making a Budgetary calculation is not available. In an ordinary year, when the Chancellor of the Exchequer stands here to open his Budget, the details of the precise Estimates for the various Supply Services have been presented—the Army Votes, the Navy Votes, the Air Votes, the Civil Defence Votes, as well as other Civil Votes under various heads. Those figures are all known, and, together with the estimates for Consolidated Fund services, they make up a definite target at which the Chancellor of the Exchequer has to aim. But in the circumstances of war, the main element of outgoing—the various heads of expenditure connected with the war—that element is not capable of being totted up and measured for so long ahead. We are forced to seek authority for such expenditure at intervals during the year by a succession of Votes of Credit. Those Votes of Credit are for round sums with several noughts at the end, but on grounds of public interest, or for other reasons, we do not distinguish completely between one Service and another. None of us wishes the enemy to infer whether we are putting our main exertion into building new ships or increasing the number of aircraft or whatever it may be, and therefore we keep the estimate in a global shape.

The Committee will recall that the first Vote of Credit for this year was for £700,000,000 and was authorised on 13th March in advance of the beginning of the new financial year. I then told the Committee that I estimated that this £700,000,000 Vote of Credit would suffice for rather more than four months of war. Now comes the first of the big conundrums of the present year. It is this: How much should I assume will be needed for 12 months of war? It is an extremely difficult question to answer with confidence, and any answer approaching precision is impossible. In the first seven months of war, which fell into the previous financial year, expenditure for war purposes was £905,000,000. At that rate, something over £1,500,000,000 would be the proportion for 12 months, but that would not be right, because the pace, the rate, of war expansion increases as indeed it ought to increase.

For the first six months of the present fiscal year, I think, from the information I have collected, that our war expenditure will be found to lie in the neighbourhood of £950,000,000. That is for those six months. But I have to take a figure for 12 months, and under present conditions any estimate for so long ahead is bound to partake largely of the nature of a guess, particularly as the actual amount is more affected by the man-power available for production, and by the supply of raw materials, than by any limitations in our plans or any restrictions in the authority for carrying them out. I must take a round figure, and I am going to assume that what will be needed by 31st Match next, for war purposes only, will be £2,000,000,000. The authority for £700,000,000 of that has already been given, and I have reminded the Committee that we shall require to have further Votes of Credit from time to time.

I have said that the public interest would not permit the publication of full details, showing precisely how the total estimated expenditure from Votes of Credit is split up between Departments, but I do not wish to carry that secrecy any further than is necessary. I propose, following a precedent adopted towards the end of the last war, to issue, this evening, a White Paper which will give some particulars of all the Departments concerned. I do not see any reason why we should not publish full details of their

staffs, so that the House of Commons may see exactly what they are. It is impossible to give the full Estimates as in peace time, but while it would be prudent strictly to limit some classes of information regarding the Defence Departments, the Ministry of Supply and the Ministry of Shipping, there is no reason why, even in war-time, a fairly complete analysis of the expenditure of other Departments should not be included, and it will be included in the White Paper.

What am I to add to this £2,000,000,000? First, I must add a due provision for the Consolidated Fund Services. I have also to add the total of the Civil Estimates already presented. In the Consolidated Fund Services the most important item is the provision for the service of the Debt. Last year it was £230,000,000. For reasons which I will explain to the Committee, I am able to retain the same figure as last year—£230,000,000. At first sight it may very well seem surprising that that figure should be enough, because we are borrowing more and in view of the large increase in the National Debt the Committee may like to know how the estimate is arrived at. The total sum needed for interest will certainly be appreciably greater, of course, in 1940 than in 1939. There is no doubt about that, although the precise amount of the increase cannot be estimated. It will depend not only on the sums we borrow and the rate at which we borrow, but also on the time of year at which we borrow. As for the rates of interest at which we borrow, it is a very noteworthy fact that we were able to raise the first of our War Loans at a rate of 3 per cent. and I am assuming that in future loans we shall not exceed the levels recently established.

That, however, is not the whole of the explanation in arriving at the amount of the Fixed Debt Charge. There is a set-off which arises under the Defence Loans Acts. The Committee will remember that, when we carried the Defence Loans Acts before the war and thereby made various sums available to the Fighting Services, we insisted that they should each year pay to the Exchequer 3 per cent. on the amount issued in previous years and that the sum so paid to the Exchequer should be used to meet the interest on the National Debt which would


otherwise have to be paid out of the Fixed Debt Charge. Owing to the large sums which were issued under the Defence Loans Acts last year, the amount to be made available from the Defence Votes under this arrangement will be nearly £15,000,000 greater than in 1939.To that extent the additional burden of interest in 1940 can be met without increasing the Fixed Debt Charge. I think, therefore, that £230,000,000 should be sufficient provision, and I have put that down as the second part of the sum which we are engaged in adding up. I hope at the end of the year it will be found that the £230,000,000 will contain something available for Debt redemption out of revenue. If so, that would be so much the better, but I shall take the customary powers to borrow for the contractual Sinking Funds should the need arise. For further items in the Consolidated Fund Services, with which I need not delay the Committee, we require £17,000,000—£9,500,000 for payments to Northern Ireland and £7,500,000 for other services. The total, therefore, for Consolidated Fund services in the present year will, I think, be £247,000,000.

We can dispose of the remaining figures very quickly—indeed, in one sentence. The total of ordinary Estimates for Civil Supply Services, excluding the cost of Civil Defence and self-balancing Services, will be £420,000,000. We have to add that £420,000,000 to the £247,000,000 and the £2,000,000,000, and I arrive at the Estimate of £2,667,000,000, as the figure to be provided for expenditure in the present year.

Before discussing how this immense sum, in my judgment, may be raised, I must make, as I am sure the Committee would wish me to make, some observations on a subject which is constantly in the minds of every Member of Parliament, and I am sure in the minds of every serious person in the country, and that is the question of economy in public spending. The people of this country, facing the demands which this Budget is bound to make, will, I am sure, be ready for the sake of victory to accept its burdens, I will not say without complaint but with as little complaint as may be, provided that they are satisfied that every effort is really being made to reduce waste and therefore to secure that we pay

no more than we need pay. I must say for my own Department that this has been the constant, the daily pre-occupation of the Treasury. The methods to this end which I explained to the Committee some months ago are in full operation and huge as this sum is which I have to provide, I can assure the Committee that it would have been substantially greater had it not been for the strenuous and largely successful efforts made in the different Departments to keep down the different heads of expenditure.

This is a fair picture of what those Departments are doing, and it does not require much imagination to see that while they have these great responsibilities to discharge, and are therefore bound to be responsible for heavy outlay, they really are trying, in the public interest, and in their own interest too, to save where and when they can. Well-authenticated cases of waste brought to the notice of the appropriate Department are not thrown on one side without examination, and, indeed, I regard it as a valuable contribution towards the financing of the war and therefore the winning of it, that not only Ministers and officials but the public, should continue to do all they can to reduce outlay by these means.

I do not suppose there is any Minister who has not had constant communications on this subject, and I am sure that I am speaking for my colleagues as well as myself when I say that whenever we have had any such information brought forward from a solid source, we have always treated it as requiring investigation with a view to introducing possible correctives. The House has appointed a Select Committee of Members under the chairmanship of my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) which is charged with the function of examining closely the expenditure of the Departments with a view to reporting whether the policy they are carrying out is being carried out with due economy. No private Committee of the House can be expected to criticise policy; that is a matter which the Government must decide, subject to the criticism of the House as a whole; but the task of the Committee is to see whether, in carrying out the defined policy, it is being done with due economy. I have familiarised myself with these matters and I know that the


Departments have shown a ready spirit of willingness to help the Committee in its investigations—I am sure Members of the Committee will confirm me when I say so—and to welcome its assistance. The Committee has undertaken its task with the greatest zeal and energy, and I welcome the help it may be able to give.

Orders of the Day — ESTIMATED REVENUE, 1940–I.

Now I approach this figure of £2,667,000,000, and I have to ask myself three questions, and the House will wish to know how I answer them. The first is, How much, as the contribution towards this total, would be provided by the continuance of existing taxes at their present level? The second is, How much more should be contributed by additional imposts which I find it my duty to propose? The third question is, How may we hope to provide the balance which remains after all that has been done?

First, as to the produce of existing taxes in the present year. If the standard rate of Income Tax remained at last year's figure of 7s., and if the changes in the allowances which I indicated last Autumn did not now come into effect, then I should estimate that the yield of Income Tax in the current year would be £408,000,000. As regards Surtax, the full benefit of the increased rates imposed last year should now be felt, and the estimated yield is £75,000,000. The yield of Death Duties should also now be fully affected by the increases in the rates of duty imposed last year, and I estimate a total of £85,000,000. The yield of Stamp Duties I place at £19,000,000.

The National Defence Contribution and the Excess Profits Tax I ask hon. Members to bracket together for the moment. These are alternative duties, that is to say, a concern does not pay both but the higher of the two. If there were no Excess Profits Tax I think, on the basis of our general information as to trade profits, that, we should look for a yield of £28,000,000 from the National Defence Contribution. As regards Excess Profits Tax, we have as yet very little to indicate to what extent the profits of individual concerns since 1st April, 1939, have exceeded their standard profits, and the best I can do for the time being is to estimate the two taxes together at a round figure of £70,000,000 to cover the total yield to be obtained from the two

duties. The other Inland Revenue Duties are expected to yield £1,000,000.

As the arithmetic of hon. Members is unimpeachable, everybody by this time will have arrived at the same conclusion, namely, that for the current year the total estimate of Inland Revenue Duties on the present basis amounts to £658,000,000—that is an excess of £75,000,000 over the actual yield last year.

As regards Customs and Excise Duties, which produced £400,000,000 last year, it is estimated that a full year's revenue coming in at the rate of flow reached in the latter part of 1939–40 would produce about £420,000,000. In ordinary times a continuing improvement in employment at full wages, and with overtime, would, of course, be expected to lead to a substantial further growth in the Customs and Excise Revenue. But we ought to set against this the restrictive effect of limitations upon consumption, whether they are effected by import restrictions or otherwise or whether they are practised by the good sense of the population, who realise how vital it is to limit civilian consumption as a means of helping to restrain a rise in prices. Taking into account these various factors on either side, I should propose to leave the total figure on the present basis for Customs and Excise at £420,000,000. The items will be shown in the Budget White Paper, and I do not think the Committee will wish me to deal in detail with them.

From Motor Vehicle Duties I estimate that the revenue will be a little more than we received in 1939, and so I put down £35,000,000.

As to the Post Office, the net cash revenue of the Post Office is expected, on the basis of existing tariff rates, to amount to only £600,000. The Committee may remember that the Finance Act, 1937, fixed the annual contribution which the Post Office was to make to the Exchequer over the three years to 31st March, 1940, and it was then left for further legislation to say what the contribution from the Post Office to the Exchequer should be for subsequent years. I explained in my Budget speech a year ago that as a result of the failure of the Post Office surplus to provide the fixed contribution without drawing on the Post Office Fund, I proposed to review the position in


conjunction with the Postmaster-General. The Post Office Fund is now exhausted, and the war has inevitably destroyed the basis for any such review. My right hon. Friend the Postmaster-General and I have therefore come to the conclusion that in present circumstances the only practicable course is to revert for the time being to the position which existed before the Post Office Fund was established in 1933, and to take the whole of the Post Office revenue into the Exchequer. As I have already indicated, the net receipt of the Exchequer will, on the basis of existing rates, be very small indeed, but—and here I am beginning to draw back the veil—the rates at present charged by the Post Office can, and should be made to, bear some increases as a contribution towards our war expenditure, and I shall later announce the increases proposed.

With certain minor items, the total Revenue for 1940, on the basis of existing rates, amounts to £1,133,000,000.

Orders of the Day — PROPOSED LEGISLATION.

So much for the first of the three questions. Before considering what additional revenue should be obtained by further taxation, I must ask the Committee to bear with me while I deal with certain matters on which legislation and in some cases Resolutions will be required.

In the first place, it will be recalled that in the course of the debates on the Finance Bill last autumn I made it clear that I did not regard the Clauses dealing with Excess Profits Tax as being necessarily in their final form. I undertook to consider various points which were raised by hon. Members at that time, and also to examine with care such representations as might be made on this subject from industrial and commercial interests affected by the tax. In accordance with that undertaking my advisers and I have been considering the matter. I have made a further review of the relevant provisions on the Statute Book, and have considered the nature of such Amendments as might be necessary to make the tax more workable and more equitable between one type of business and another. I am not going to anticipate now the detailed provisions which will appear in the Finance Bill, but it must not be imagined that these

changes constitute merely a list of concessions to the taxpayer. They do not, for in a number of cases the changes will make the machinery more efficient and satisfactory for the collection of the tax.

There is one class of Amendment which is of such importance that I ought to mention it now. It has to do with Section 13, Sub-section (7) of the Finance (No. 2) Act, 1939. That Sub-section confers powers on the Board of Referees to allow a substituted standard when the figures of past profits would not constitute a reasonable standard. This particular provision was intended to deal with cases of hardship. It was not intended, and it will not be intended, to lay down an alternative standard of general application; all that will remain in principle as it was; but I am satisfied that we must amend the wording of that Sub-section in order that it may properly carry out the purpose for which it was framed. In particular, we must see that any new wording provides adequately for concerns belonging to depressed industries, or concerns which in the standard period were still in the process of development. In addition I must meet the legitimate criticism that the limitation of that Sub-section in ordinary cases to a percentage calculated in relation to share capital, without having any regard to the financial structure of the company, is not one that can be defended as fair between one company and another.

These changes will not, I hope, create controversy, because they are recognised as being called for in order to make a reasonable standard. I propose, therefore, that the machinery of the Board of Referees shall be available in the case of all concerns for which the profits of the standard years were so low as not to constitute a reasonable standard. There will be particular provisions in the case of industries suffering from depression in the pre-war years, so as to ensure that adequate standards will be available. Where the share capital does not adequately represent the trading assets, the real value of those assets will be taken into account in computing the substituted standard.

That is all I have to say on the subject of Excess Profits Tax, and now I must outline a number of other proposals. In the first place, in view of war


conditions, we must postpone the general revaluation of properties for assessment to Income Tax, Schedule A, which otherwise should be made next year.

Secondly, there is an anomaly—a very curious one, I think—in the working of children's allowances for the purpose of Income Tax, and I propose to correct it. Apparently, as the interpretation of the law now stands, although the allowance per child is deducted only once, when the parents are living together—of course, the husband is, in that case, assessed both for himself and for his wife—if they are separated, either by decree of divorce or by agreement, cases may arise in which the allowance is deducted twice for the same child, once on the father's assessment and once on the mother's. [Laughter.] I observe that hon. Gentleman opposite are making the same comparison as occurred to me. This appears to be a modern application of the famous judgment of Solomon about dividing the child of which the Board of Inland Revenue cannot approve.

I propose to insert in the Finance Bill a Clause which will correct this anomaly. Resolutions will be required also to secure the charge of tax on rents which are not covered by the existing charge under Schedule A, to amend the law as to the measure of liability of tax in respect of dividends, in certain cases, in which under a recent legal decision, no addition can be made to dividends in respect of Income Tax at the standard rate; and to deal with the measure of liability of income from foreign sources, and with the depreciation allowance for leased machinery.

Lastly, I have a change to suggest which I hope will give general satisfaction. I propose that we should revive the benefit of Section 29 of the Finance Act, 1917, under which the estates of merchant seamen and fishermen killed during the last war were granted relief from death duties.

I have to make further proposals for dealing with avoidance of taxation. The Committee will be aware that the Finance Acts of recent years have contained provisions aiming at checking avoidance in the sphere of Income Tax and Surtax. On the whole, those provisions have had a real effect and have been successful, but, in the case of Estate Duty, no important provision designed to deal with avoidance schemes has been introduced since 1930,

when Lord Snowden dealt with the avoidance of Estate Duty through the medium of private companies. That legislation has proved not altogether effective, and I propose to amend it, and, at the same time, to deal with other forms of Estate Duty avoidance which have come to light in the meantime. I am sure that Parliament will show no sort of tolerance at this time of day to citizens who seek, by purely artificial arrangements, to escape their proper share of the heavy burden of taxation. I therefore shall count on the support of the Committee for action taken to repair any gap in our legislative defences against tax avoidance.

In regard to Customs and Excise, apart from any change of taxation, I shall propose legislation in regard to two points. The object of my first proposal will be to assist the export trade by improving the conditions under which the drawback is payable on exported goods which have been subject, on importation, to the Key Industries Duties. That change will help the export drive. This will be done by assimilating those conditions to the corresponding provisions of the Import Duties Act. For technical reasons, a Budget Resolution will be required.

The second proposal will relate to the margin of preference on Empire sugar, the stabilisation of which beyond 19th August next is linked with the operation of the International Sugar Agreement of 1937. In present circumstances, I am advised, it is doubtful whether that Agreement will function in the near future in the manner which Parliament contemplated, when it authorised the existing provisions in regard to Empire sugar. The object of the legislation will be to make it clear that the present preference shall, nevertheless, continue until the end of August, 1942, the period originally contemplated when the International Sugar Agreement was negotiated.

One thing more. Last month I announced a concession whereby members of His Majesty's Forces at home on leave from service overseas or service afloat, might be exempt from Motor Licence Duty, on their own cars or motor cycles, for a short period on payment of a fee of 10s. in the case of a motor car and 2s. in the case of a motor cycle. That proposal was generally welcomed, and the concession has already been put into force. It


will be the subject of a Clause in the Finance Bill, and will be preceded by a Budget Resolution.

This is a convenient point at which to mention another matter which I touched upon in my last Budget speech, namely, increases of wealth which may, in some circumstances, be found to accrue to individuals, as a result of the war. There were such cases after the last war, but I am sure that it is the general sentiment, both of the country and of this House, that if, as an outcome of a period when many people are making sacrifices which no money can measure, while some may come out of the war greatly impoverished there emerge after the war a minority of individuals to whom the war had brought nothing but colossal fortunes, Parliament would never pass such a situation by without effective and appropriate action. [Interruption.]

Mr. Dalton: That was said last time.

Sir J. Simon: Of course, all of us try to behave better as time goes on. Almost exactly a year ago, on 27th April, 1939, the Prime Minister dealt with this matter. He referred to the impropriety—to use no stronger word—of such increases of wealth being made out of the conditions created by war, as happened after the last war, in some instances. He pointed out—and I quote his words—that
changes which are induced by war may alter very materially the relative values of property, and that whereas some may be enriched, others may be impoverished. It is doubtful whether the matter can be dealt with effectively during the progress of the war until the permanent change in values has been established, but I think it is possible that the subject could best be grappled with by a levy on war-time increases of wealth such as was examined by the Select Committee in 1920."—[Official Report, 27th April, 1939, col. 1351, Vol. 346.]
The Prime Minister was speaking before the present war broke out. I dealt with the matter further in opening my Budget in September, when I pointed out that this was essentially a post-war project, because it was only after a war that your increases of individual wealth were apparent and ascertainable.
We have considered the question whether any steps are necessary now, in order that, when the time comes, namely, after the war is over, Parliament may put

into operation some such scheme. We are satisfied, however, that this is not the case, indeed, the Select Committee in 1920, when devising and recommending such a scheme, was able to formulate it, without any special action having been taken during the war. The heavy taxes which we are imposing—the application of an Excess Profits Tax which operates from the beginning of the war, and another measure which I shall describe later on—will all operate to reduce the number of cases of individual accretions of wealth which might otherwise arise. So far as they did arise, of course, and if Parliament so decided, a post-war levy on such increases could be applied. I believe that the intention of the Government, which I here repeat, to deal with this matter when the time comes will receive general support.

Sir William Davison: Does my right hon. Friend realise that this will apply to municipalities as well as to individuals?

Sir J. Simon: That may be; we will see when the time comes.

Orders of the Day — NEW TAXATION.

I can now return to the main stream of my discourse. I apologise for keeping everybody waiting for my actual Budget proposals. The Committee will have gathered from what I have already said that I consider it necessary, by means of additional taxation, to increase that total of £1,133,000,000 of revenue which would be produced if we confined ourselves to the provisions in force last year. I must look to both direct and indirect taxation.

Orders of the Day — INCOME TAX.

In the field of direct taxation I must bring into actual operation the proposals for increasing the standard rate of Income Tax and for reducing the allowances which I indicated in advance last September. I then said that we should not limit our view to the period of six months alone, but that we should set standards and levels, with a view to their continuance in the financial year at which we have now arrived. Accordingly, I propose to raise the standard rate of Income Tax from 7s. to 7s. 6d.

Mr. Thorne: Very good, Sir.

Sir J. Simon: The relief contained in Section 11 of the Finance (No. 2) Act,


1939, under which individuals whose earnings in the year of charge drop by as much as 20 per cent., as compared with a figure for the previous year, on which they would be normally assessed, were entitled to substitute the smaller figure, will be repeated, in connection with the present year. I have had abundant indication that the arrangement was a very great relief to many people who were very hard pushed. Combined with this increase of the standard rate to 7s. 6d. in the £, there will now come into operation the amendments and restrictions of the Income Tax allowances which were announced last year. I do not think I need spend time in recalling them in detail, as they will be found in the White Paper, but I wish the Committee to observe that the effect of the changes will be to require a very substantial contribution throughout the scale, from one end of it to another. There will, of course, be in the White Paper, tables setting out the result, for different levels of income and different family circumstances, and contrasting these with the results of the tax last year. These are very severe increases, which put a heavier burden on the direct taxpayer of this country than he has ever been called upon to bear. The standard rate of Income Tax will have been raised in a single year from 5s. 6d. to 7s. 6d., which means that, with Surtax added, the maximum rate will run up to 17s. in the £. Nothing on that scale has ever been approached before, whether in war or in peace. The highest previous rate of Income Tax was 6s. in 1918; and with Super-tax added the maximum during the last war was 10s. 6d. in the £. I do not want to dwell solely on that end of the scale, but I wish to state this clearly in view of what is to follow. The increased charges on the smaller incomes—what somebody has called the £5 to £12 a week man—are striking.

Mr. George Griffiths: He is in the gallery.

Sir J. Simon: An extraordinary coincidence. "Striking" is perhaps the word. I will extract two or three illustrations from the White Paper. Let us take, for example, the case of a married man without children. If he earns £300 a year, he will pay £15 in Income Tax instead of £7 which he paid last year and £5 the year before. If he earns

£400 a year, that is £8 a week, he will Pay £30 12s 6d. this year instead of £17 10s. last year and £12 12s. 6d. the year before. If he earns £600, he will pay £92 16s. 3d. instead of £73 10s. last year and £56 12s. 6d. in 1938–39.
These changes in Income Tax, together with the minor changes in the law which I have announced, will increase the yield of direct taxation in a full year by £61,750,000. In the current year I estimate that they will bring in £42,500,000.

Orders of the Day — SURTAX.

I have another change to make in the sphere of direct taxation. As the Committee will be aware, the Surtax payable on 1st January, 1941, for which rates of charge will be laid down in this year's Finance Bill, is payable in respect of income for the year 1939–40. We must distinguish between the rates of charge on Surtax and the field over which Surtax operates. The field over which it operates—that is to say, from £2,000 a year upwards—is determined a year in advance, although the rates of tax are left to be fixed in the year in which the tax is payable. In these circumstances, the field for 1939–40 has already been defined in last year's Finance Act, and I could not justifiably interfere with that. But I cannot allow my hands to be tied indefinitely in this manner. I therefore propose to provide in the Finance Bill and in the appropriate Budget Resolution that Surtax for the year 1940–41, for which the rates will not be laid down until the 1941 Finance Bill, can be charged on incomes in excess of £1,500 per annum instead of on incomes in excess of £2,000. This is an enabling provision, and does not increase the amount of tax payable this year by those with incomes between £1,500 and £2,000, but it makes it possible to do so in 12 months' time. I hope that the Committee follow this complex arrangement.

Orders of the Day — CUSTOMS AND EXCISE.

I must also find additional revenue in the realm of indirect taxation. Later on I shall be describing a proposal for a new kind of tax, but as this cannot be imposed until after machinery for its due application has been set up, I will omit this for the moment in order to state to the Committee certain additions in the rate of existing charges which I am asking them to sanction and which


will take place forthwith. None of these additions to indirect taxation will touch essential articles of food or any commodity which enters into the calculation of the cost of living. The proposals I make are to add to the existing duties on beer, spirits, tobacco and matches.

Orders of the Day — BEER.

In the case of beer, the increase on beer of average gravity will be roughly equivalent to a penny per pint, but for reasons of revenue protection connected with the very complicated formulas under which this duty is charged the new rate of duty will be expressed as 65s. per bulk barrel plus 2s. 6d. per degree of gravity above 1,027 degrees. It will take effect from to-morrow. [An Hon. Member: "The beer will?"] Hon. Members will appreciate that we must judge a tax partly by considering what it will produce. I estimate that this increase will produce £18,000,000 in a full year and £15,000,000 in the current financial year.

Orders of the Day — SPIRITS.

The Spirit Duty must also be further increased by 15s. per proof gallon, which will make it 97s. 6d. a proof gallon. A simpler comparison to some hon. Members may be that I understand that at the moment the ruling price for a bottle of whisky is 14s. 3d. The increase will be equivalent to 1s. 9d. extra.

Viscountess Astor: Is that all?

Sir J. Simon: On behalf of His Majesty's Government I would like again to thank the French Government for agreeing to waive their Treaty rights and thus permit the increase to apply to French and other imported spirits as well as to the home-produced article. Brandy and whisky in this matter march hand in hand. The increase in the duties on spirits will take effect from to-morrow, and is estimated to produce £7,000,000 in a full year and £6,500,000 this year.

Orders of the Day — TOBACCO.

The Tobacco Duty will also be increased as from to-morrow by 4s. per pound or 3d. an ounce in the basic duty, together with corresponding increases in the other duties. I realise perfectly that this increase, following as it does, the two increases included in my Budgets of April

and September, 1939, is a severe one, but in existing financial circumstances there is, in my view, no escape from this additional impost. I estimate that as a result of the increase I shall obtain an extra £23,000,000 in a full year and £21,000s,000 this year.

Orders of the Day — MATCHES.

As regards matches, the basic rate is at present the Excise Duty of 4s. 2d. per gross of boxes containing over 20 but not more than 50 matches. That duty has not been altered since 1927, but the corresponding Customs Duty is 4s. 9d. to which figure it was raised in 1933, the excess of 7d. being intended to compensate the home manufacturer for certain costs he had to bear in connection with revenue control, for certain duties levied on his raw materials and for the purpose of providing him with a margin of protection against foreign competition. The details of my present proposals will be found set out in the White Paper, but, broadly speaking, I propose to double the Excise Duties and to make corresponding additions to the Customs Duties, except that I propose to increase the Customs Surtax from 7d. to 8d. in view of the higher costs of home manufacture. The effect of these proposals will be that a box of 50 matches now costing a penny will cost 1½d., and the booklets of 20 matches now sold for a halfpenny will be replaced by booklets containing 30 matches, which will sell for a penny. These changes will come into operation from Monday, 29th April. The yield to the Exchequer is estimated at £4,000,000 in a full year and rather more than £3,500,000 this year. I need not go into details, but there will have to be countervailing increases in the duties on mechanical lighters. In view of the existing prohibition on the import of mechanical lighters the revenue effect of these proposals is practically negligible.

Orders of the Day — POST OFFICE CHARGES.

Now I must call the Post Office to my aid, as my predecessors did in the last war. My right hon. Friend the Postmaster-General, though naturally reluctant to increase Post Office charges, and especially in the year which marks the centenary of the penny post, appreciates the necessity in the present circumstances for the steps which I now propose. It should be made quite clear


that these increases are forced upon us solely as a means of supplementing war-time revenues. Full details will be found in the White Paper and I will confine my statement to the main items.

The general scheme is to increase certain initial postal charges but to leave charges for excess weight untouched. The initial rates of the Inland post will be increased, for letters, by 1d. per packet, which will mean 2½d. instead of 1½d. for letters up to two ounces, and for postcards from 1d. to 2d.; for printed papers by ½d. per packet; and for newspapers by a ½d., with a reduction in the steps of the existing scale. There will be similar increases for letters and postcards in the Imperial post, except that the present rates will be retained for correspondence with the Forces overseas. For the foreign post the rate for letters will be increased by a ½d. a packet—3d. instead of 2½d.—and that for postcards also by ½d. Neither in the Imperial nor in the foreign post are any increases proposed for other classes of mail. It was considered right to refrain from increasing the charges for services which are so important in the development of our export trade. It follows that there will be no increased charge on Air Mail.

It is also proposed to make some changes in the poundage charged on postal orders; full details will be found in the White Paper. These increases in the postage rates and on postal orders will take effect from 1st May, with the exception of the increased newspaper rates, which will come into effect after the passing of the necessary legislation. They are estimated to increase the revenue by £10,400,000 this year and by £11,400,000 in a full year.

In the Inland telephone service there will be a general increase of 15 per cent. of all charges to subscribers with exchange facilities and to users of coin box telephones. These increases will take effect as from 1st May, in the case of trunk calls and all calls from public call offices, and from 1st July in the case of rentals and miscellaneous charges. The increased charges for subscribers' local calls will apply to all calls made after the date on which subscribers meters are read towards the end of June. For private telephone services the increase will be 25 per cent. and will operate from 1s.t July. These increases are estimated

to yield just over £2,000,000 this year and £2,850,000 in a full year.

In the case of the inland telegraph services, there will be a fixed additional charge of 3d. on each ordinary, priority or greetings telegram, on each night telegraph letter and on each page of press telegram. These additional charges will operate as soon as possible after the passing of the necessary legislation. Charges for private telegraph services will be increased by 25 per cent. as from 1st July. These increase in Inland telegrams and telegraph services are estimated to produce £160,000 this year and £240,000 in a full year.

The overseas telegraph and telephone services are necessarily limited during war-time and, in view of the difficulties and restrictions imposed upon the business user of these services no increase in the current charges is proposed. These considerations do not apply with the same force to the services to Eire and for particulars of the increases proposed in this case I refer hon. Members to the White Paper.

All the increases in Post Office charges taken together are estimated to yield about £12,500,000 this year and about £14,500,000 in a full year. I will not delay the House with more explanations. A large part of these changes will be effected by Warrant or Regulation under existing powers. Some will obviously require statutory authority.

The Committee will begin to see how very difficult it is to make up a great additional figure even by the most exacting and formidable increases of taxation.

Orders of the Day — PURCHASE TAX.

I referred a few moments ago to a novel proposal which I said I had in mind, and I must give the Committee a short account of a new form of tax which, if it is enacted and put fully into effect, should be a source of substantial additional revenue in time to come. I propose to call it the Purchase Tax. It is a form of sales tax. Sales taxes of different kinds are in operation in a large number of countries and most of the Dominions, I think, but the methods and the machinery differ considerably. The Departments for which I am responsible have examined these schemes, and we think the proposal which I am going to outline is on the whole the best. A sales


tax essentially consists in securing an additional payment for the benefit of the State at the time when a purchaser is paying his supplier. As goods normally pass through several hands on the way from the producer or manufacturer to the individual who finally consumes them, it is necessary to fix at what point in the chain the percentage addition in the price which represents the tax will be applicable. To provide that there is to be a sales tax whenever there is a sale would mean that there is a tax to pay at every stage between the first producer and the final user, with the result, amongst others, that some commodities would bear tax many times and others not quite so often. On the other hand, if a sales tax were to be imposed only in connection with the final purchase, so that whenever a sale is made in a shop a tax is paid by the customer to the shopkeeper in addition to the price, that, apart from all other objections, would involve the recording of and accounting for an enormous number of transactions, many of them very small, and would interfere in many ways with the ordinary carrying on of busy retail trade.

I, therefore, reject these types and, in the scheme which I am proposing, the Purchase Tax, in the form of a percentage of the price, will be paid at the stage when the wholesaler is selling to the retailer. One great advantage of applying the tax at this point is that it makes it easy to secure what is really essential to the scheme, namely, that there should be no Purchase Tax charged in respect of goods for export. We must exclude exports. That is a most important point when, as the Committee knows, there is a most strenuous drive to increase our export trade under the leadership of the President of the Board of Trade while, at the same time, it is necessary to discourage unnecessary spending at home. It is plain, therefore, that the tax must not touch exports. Neither will it touch raw materials in industry, for it begins to apply only when the wholesaler distributes the product. I may as well mention the other principal exceptions now. There will be no Purchase Tax on food, drink or foodstuffs, whether for human or animal consumption, or on articles already subject to a heavy duty, such as tobacco or petrol. Generally speaking, it

will not apply to services as such, nor to fuel, gas, electricity or waters.

An essential preliminary for the successful working of such a tax is the creation of a register of wholesalers, upon whose sales to unregistered persons the tax should be levied. It will be necessary to include in the register producers and manufacturers, in order not only to cover cases where they sell goods direct to retailers or consumers, but also to enable them to buy free of duty goods which they require for the purpose of carrying on their business of production or manufacture. Of course, I am only giving an outline, and an outline is bound to be a little confusing, but details will be available in the clauses of the necessary legislation.

If I may, I will illustrate the general nature of the scheme by inviting the Committee to consider an imaginary case. Suppose all the wholesalers in the country, together with the producers and manufacturers, were gathered together inside a ring or enclosure, and suppose they effected their sales by passing their goods over the fence to their customers assembled outside. The Purchase Tax would apply, subject to the exceptions I have named, to each such transaction. It would not in general apply to transactions between people inside the enclosure, or between people outside the enclosure. It would apply to a deal done over the fence. My metaphor may seem an echo of the arrangement which, I understand, is made at some racecourses for the convenient transaction of business but I hope that what I have said may help the Committee to follow the general idea. The only difference between my imaginary picture and the actual situation is that, of course, the wholesalers are all over the whole country, and therefore the formation of a register is an essential preliminary to the actual imposition of the tax.

Liability to Purchase Tax, therefore, will arise on the occasion of a sale by a registered person to a non-registered person, and it will be the business of the seller to get the tax from the purchaser at the time he receives payment for the goods; the seller will be accountable for the tax to the State. The administration is intended to be in the hands of the Commissioners of Customs and Excise. What I am proposing is that the principle


of the Purchase Tax should be approved in the present Budget and the necessary machinery enacted in order that a register may be compiled. Before introducing the machinery provisions, I should hope to have detailed conversations with trade organisations of different kinds in order that the machinery of collection shall be framed as conveniently as possible to fit in with the general practice of trade. The subsequent legislation would provide that the date of imposition of the tax and the rate per cent. to be applied should not be decided now, but should be determined hereafter by Resolution of the House of Commons.

Let me point out the significance and appropriateness of the proposal. It is, of course, of the greatest possible importance to restrict internal spending at this time. The tax will assist in securing that result without interfering with our plans for maintaining an adequate supply of food and for keeping its price moderate. The tax will put no sort of obstacle in the way of export trade, but we must be resolute in reducing consumption at home. It is the deliberate intention of such a tax as this to do so. My right hon. Friend the President of the Board of Trade and his Export Council are making-stalwart efforts to increase our exports, and thus to help to pay for the war, and we must recognise that this should be done even though it involves diverting the efforts of manufacturers to a certain extent from the home to the export market. That will help to conserve man-power for the essential purposes of the war, and it will reduce the demand for supplies, some of which have to come from overseas. The truth is that we have to face quite boldly the necessity of transforming our home economy for the purpose of helping to win the war, and this cannot be done without drastic and definite action. That may impose sacrifices all round, but we have to face those things so long as they are fairly adjusted between the people.

But there is another point. I have received many suggestions that the revenue might be increased by taxes on various selected articles—cosmetics, for example—and I have had many of these suggestions closely examined. But they are all open to the objection that a tax on some specially selected article would produce

very little compared with the special and sometimes elaborate machinery required, and very often open to the further objection that it is difficult, or even impossible, to draw a line between what is taxed and what is not. I could give many illustrations. Everyone feels a natural sympathy with the idea that we should put a tax on luxuries—and this Purchase Tax will tax luxuries among other things—but the fact is that the luxuries of the few, taken by themselves, and taxed as you like, do not produce the great sums of money with which we are dealing now in connection with this War Budget. It is a very large sum of money which has to be found in the effort to help to meet the expenses of the war and a widening of the field of taxation is very necessary. The generality of the Purchase Tax, apart from such specific exceptions as I have mentioned, is really an essential feature of the plan.

I cannot offer at present any estimate of what the application of such a tax would produce for, of course, such a calculation can only be made when the machinery is settled and the rate of the tax is known. But I can inform the Committee of this. I have spent some months of very close labour in examining various alternative suggestions, and this form of taxation, if boldly applied, is capable of producing a larger additional sum towards our revenue than appears likely to be drawn from any other immediately practicable form of tax.

We can now sum up the anticipated results of the extra taxation which I have to impose. As usual, the additions to be gained this year are less than we should get in a full year. In the current year, the increases from Income Tax will yield an extra £42,500,000, the Post Office an extra £12,500,000, beer an extra £15,000,000, spirits an extra £6,500,000, tobacco an extra £21,000,000, and matches an extra £3,500,000. That makes a total of £101,000,000. We must add that figure to the £1,133,000,000which I have already given as the produce of taxation on last year's basis, and we then have an estimated total contribution from revenue of £1,234,000,000— 1234 happens to be the telephone number of the Treasury. An ingenious friend of mine to whom I made that small joke said, "Yes, and this is the 234th day of the war." A still more surprising coincidence is this. If—keeping to round


figures—you take the £1,234,000,000 from the total of the estimated expenditure, which is £2,667,000,000, you will find that what is left is £1,433,000,000, but actually the result is nearer £1,432,000,000— 1432. These figures give us an idea of the size of the problem. I have not added anything on account of the Purchase Tax, but if the preliminary arrangements we suggest are approved by the House and carried through successfully, we hope to get something from that source before the end of the present year.

We are now at the last of our three problems. Having taken this large amount by taxation, we are still left with £1,433,000,000 to find—the actual figure in the White Paper is £1,432,399,000. Hon. Members may feel that this is a long speech but I have to do my duty in discussing this third problem, which is vitally important. It is really the central question of this Budget: more important than the taxes. How is this remaining amount of £1,433,000,000 to be provided? Can so large a gap be bridged by borrowing on existing lines, or are there other means to which we should now have recourse?

First, let us take account of two reliefs which will be available and which will help to reduce the gap. The first is the balance of £100,000,000 of which I reminded the Committee earlier on, which is the remaining proceeds of the recent successful 3 per cent. War Loan. Secondly, in so far as we meet our large purchases abroad this year by the use of some portion of our gold reserves, that process itself reduces proportionately the Budgetary problem.

As to the problem that remains, everything depends on these three things: first, the extent of the funds that become available for loans to the State; secondly, the effectiveness of the appeal that is made that they should be so lent; and, thirdly, the effective discouragement and prevention of undesirable private outlay from wages and other income. The immense expenditure which we are incurring in pursuance of our war effort is continually putting increasing sums into private hands, and those sums, if they are not squandered upon unnecessary consumption, but are saved, as they should be, and lent to the State, constitute a steady,

increasing fund of genuine savings, from which central needs may be continuously replenished. The success of the recent £300,000,000 Loan augurs well for the future issues that we shall have to make from time to time. The success of this Loan is all the, more significant because it was issued before Government payments had percolated through to the community to the extent to which this may be expected in the near future. It is quite true that there has been an increasing use of Treasury Bills during the past year, but the quantity at the beginning of the year was quite unusually low, and there is still room for some further increase.

Lastly, let us consider the quite remarkable success of the National Savings Campaign, which was re-started in connection with the present war, last November. Already, in the first 21 weeks of this movement—less than half a year—no less than £131,849,559 has been invested in Savings Certificates and Defence Bonds. That shows the immense power of the small savings movement, and the readiness with which people in receipt of very modest incomes are coming forward to support the finances of the State, to the great benefit also of themselves. I think the Committee will join with me in expressing the gratitude of us all to the fine organisation of voluntary workers, inspired by Sir Robert Kindersley and other leaders of the movement, who are working on this campaign every hour of the day.

Now I come to a matter which is very much in the minds of some of us. It will be noticed, of course, that the methods of borrowing to which I have referred are the issuing of further loans on the markets, the use of Treasury Bills, and the development to the very full of the small savings movement. They all depend on the voluntary action of the lender. Another method has now been put forward. It has been advocated by its author with much brilliance and persistence. According to this scheme, despairing of the sufficiency of voluntary action, we should supplement our system of taxation by a system of compulsory deductions from wages and other income. These deductions are described as "deferred earnings," because the scheme is to provide for repayment some time after the war, but the plan, as it seems to me, is really a plan for a forced loan, to be collected, so far as the wage-earner is concerned, by deductions effected by the


hand of his employer. These deductions, in Mr. Keynes's scheme, are very severe. I will give one example from his book. Take a married man without children, earning £400 a year. I said, earlier on, that, under the increased taxation this year, he would be paying£31 in Income Tax. According to this plan, he would not only pay £31 in Income Tax, but also compulsorily contribute out of income a loan of a further £68.

I need not say that I have examined these proposals, and several variants of them, with the most anxious care. If they appeared to be the best means, at this stage, of financing the war—still more, if they provided the only real solution of the very serious financial problem which we are facing—I should not hesitate to urge their adoption by the Committee. But I am far from being convinced that such a scheme has all the merits which in some quarters are claimed for it. Experience goes to show, in many cases, that the first effect of compulsion is to kill the voluntary method. (The reason why taxation is put on a compulsory basis is that so few people make taxation contributions voluntarily.) We should run the gravest risk of losing at one blow what the National Savings Movement has done for us. I would rather make it plain to the wage-earners of this country and to all others who can lend a portion of their income to the State, that, so far from having lost faith in their willingness to help the country at this crisis in our fate, we are confident that the response will be greater than ever.

It is very difficult to suppose that when individual circumstances differ so widely, so much, in addition to Income Tax, can be justly claimed from all of the same income, while adjustments to meet a difference in circumstances would be very difficult to work satisfactorily. One man, for example, may be suffering from a disastrous fall from a higher income which has left him because of the war, and may be loaded with liabilities which he cannot escape. He may be a schoolmaster, who has done well, with a lot of pupils, but has lost his pupils, who have been evacuated from a school in the eastern counties, and his income has dropped. Another man, enjoying the same figure of income, may never have been so prosperous and well off in the whole of his life. I would add only two other points. It must not be assumed

that the forcible deduction of so considerable a part of wages would necessarily leave the level of wages untouched. Yet if, in consequence of the scheme, the level of wages rose, the results claimed for the scheme in preventing inflation would be gravely modified. Finally, a close analysis of the proposal goes to show that it would raise administrative difficulties of so serious a character—adding, for example, enormously to the number of cases in which total income must be precisely ascertained—that it is doubtful whether it could, with our available machinery, be worked.

I would advise the Committee, therefore, to rely on the results to be obtained by stimulating to the utmost the response to our existing methods of borrowing. Why should we suppose that the willing exertions of our people, if properly roused and directed, will produce less result than if we attempted to apply a cast-iron formula and compel our people to lend? Nobody is better qualified than the British trade unionist to know what is at stake, for the victory of Hitlerism means the end of Trade Unionism. Nobody has better reason than we who enjoy freedom to be willing to pay the full price necessary to preserve it.

I have an observation to make at this stage, which, I hope, will help the conclusion which I ask the Committee to reach. I am informed that in some quarters there has been a hesitation in making full use of the opportunities for small savings on the ground that, in the event of the individual hereafter losing his employment and continuing unemployed until he is obliged to apply for unemployment assistance, his war savings might be taken into account in determining the amount of assistance to which he would be entitled. [Hon. Members: "It would."] I am told that this is a feeling which is widespread. There is no need to discuss whether the objection is really justified, but I am so much concerned to encourage war saving in every possible way that I am prepared to see the existing rules governing the application of the means test modified so as to remove this objection altogether.

Mr. Woodburn: The old age pensioners too?

Sir J. Simon: I understand the hon. Member's interruption. This will require


legislation. The general effect of the legislation will be to withdraw from the calculation of means for purposes of unemployment assistance the new money lent to the nation during the war up to a total of £375. I have taken £375 because it is the cost of purchasing 500 National Savings Certificates, which is the maximum that any individual can purchase. The provision must be equally applied whether the new money is in fact invested in National Savings Certificates, in Defence Bonds, in subscriptions to War Loans on the Post Office Register, or deposited in the Post Office Savings Bank, or in the Trustee Savings Banks. But, of course, the total amount excluded under the arrangement must not exceed £375 in the case of any one person. It will be necessary in the legislation to make provision to secure that the investment really is of new money and is not a transfer of money from previous funds of the same sort, since the object of the arrangement is to help to gather in the largest possible amount of additional savings for the war.
I am glad to answer the question put by the hon. Gentleman opposite. I explained about the supplementary old age pensions, that the pensioner applying for one was not to be treated worse than he would be treated under the Unemployment Assistance Board. It follows that the new arrangement will also apply to the calculation of supplementary pensions.
The statement that I have just made is in line with the advice that I have received from the two sides—(Employers and Trades Union Congress); I was fortunate to see both sides—of the National Joint Advisory Council. I have advisedly made a full concession. I have not argued whether it should be £200 or £250. I think the simple thing is to take the full amount, and I have done so in the belief that it will attract the support not only of all parties in this House, but also of all concerned in industry.
On that basis, what are we to do about the sum to be found by borrowing—£1,433,000,000—it might turn out to be even greater than I have estimated. But be that as it may, I say with confidence, and I think that everybody here will confirm it, that it will be found, and it must be found. What we have to do is to foster and improve the conditions under

which the flow of voluntary contributions to Government loans may be stimulated and inflation may be avoided. Whatever measures will help to restrict the misuse of spending power, and especially the misuse of increased spending power coming into the hands of an individual as a consequence of war conditions are of vital importance.
I apologise, but I would like just before I sit down to present the economic policy which is involved in this conception of our war efforts. I would like the Committee to realise how the effort of the Government in the economic sphere has been directed from the outset to the securing of these objects. A series of steps have been taken, and are being taken, all converging on this end. What are we aiming at? We are aiming at maintaining a level economy in which prices and profits and remunerations are kept as steady as war conditions will allow, and in which the flow of such goods, as are available for civilian consumption, is kept in regulated supply. Let us examine some of these measures. The first is the strict control of imports. The import licensing system was brought into operation at the outbreak of war with the object of conserving our resources of foreign exchange by reducing imports of those goods which are not essential goods or goods which we can do without in war-time. It is all the more important, because, for the purposes of the war, there are other kinds of goods which we must import in increasing measure. The system applied, at the outset, to a wide range of manufactured goods and to non-essential foodstuffs, and by successive extensions the range has been greatly broadened. Let me give a figure. It is estimated that the operation of this part of our import system is reducing less essential imports, which, in 1938, were valued at about £125,000,000, to a figure in the first year of war of about £50,000,000. But the system of import control is not confined to non-essential articles. It has been extended to many raw materials, such as steel, timber and flax, for the purpose primarily of enabling the Ministry of Supply to control the whole of the trade and to ensure that available supplies are used to the greatest national advantage. The licences of those commodities are issued by the Import Licensing Department on


the advice of the Ministry of Supply. For similar reasons the system has now been extended to the import of all foodstuffs, which, with minor exceptions, are licensed on the advice of the Ministry of Food. This system of controlling, checking and directing imports and shutting out what we can do without and bringing in the things we must have, now applies to 75 per cent. in value of the whole of our imports. The Committee will see, therefore, how powerfully this system of import control helps to prevent unnecessary spending and concentrates purchases on the things that are essential.
Take this further example. We are exercising control of raw materials under a system which we are continually elaborating by which the available supplies of these essential goods are carefully allocated. The first priority must be assigned to the war effort. Subject to the essential claims of the war effort, the next priority must go to the export trade. It is the residue which is being made available at appropriate prices for civilian use. Similarly, we are exercising control over staple foodstuffs, and it has been our policy to secure that the price of certain essential foodstuffs—in rationed quantities where the circumstances of the case require—should be kept moderate even if this involves a considerable cost to the Exchequer. The Committee will like to know that we are now finding about £60,000,000 a year to cheapen the price of certain essential foods.
Take further examples. Control has been taken of a variety of industries which are now working on Government account as an integral part of the war effort under agreements which limit profits. We have control of our foreign exchange resources. We have marked out strictly moderate interest rates for the financing of the war. The Prices of Goods Act is aimed against unreasonable increases due to scarcity or otherwise in the price of common necessities which were not controlled, and by a system of costing and contract procedure we endeavour to secure that the rate of profit upon Government work shall not be more than is reasonable in amount. Nevertheless, it may still be true that businesses which are putting forth very greatly increased volumes of output, may show increased aggregate profits, and the Excess Profits

Tax has been imposed to take over into the Exchequer the greater part of any such increases. I wish the Committee to observe that all these matters are part and parcel of a single economic policy, and that the effort of the Government in every sphere, concentrated upon the winning of the war, is being carried through under conditions which are the best that we can make for securing that object.

Orders of the Day — PUBLIC COMPANIES (LIMITATION OF DIVIDENDS).

I have one other announcement to make. There is a further contribution to this end which I have in mind and which will be contained in a Bill that will shortly be introduced. It is not strictly a financial measure, but it is complementary to the whole economic policy that I have just outlined. The Excess Profits Tax is at a heavy rate, but it leaves a certain proportion of increased profits in the hands of the businesses which make them. That is advisable as a reasonable incentive both to business economy and to increased output. I think that these increased profits where they occur are valuable in proportion as they remain in the businesses concerned and that they lose a great deal of their value if they are distributed freely as dividends. They will be very useful if they are available to sustain the industries in the very difficult period of adjustment which will follow at the end of the war. They are far less valuable if they are used for increased distributions into the hands of shareholders who may be tempted to devote a good deal of them to purposes of consumption. I propose accordingly to provide for the limitation of dividends paid by public companies during the war period. [An Hon. Member: "What about private companies?"] There are very great difficulties, which I am sure the lion. Gentleman appreciates. The Bill will propose that a public company shall not distribute a greater dividend on ordinary shares than was distributed in any one of three pre-war years. That is to say, a business which has been able to distribute in the past a big dividend will not be prevented from doing so again, but it cannot increase it. But a minimum rate of dividend will be allowed in the case of companies which in the recent past have been unable to pay that minimum, and where there are no complications such as participating rights


of other shares, the minimum will be the equivalent of 4 per cent. There will have to be provision for exceptions for new companies and a general dispensing power for hard cases to be exercised by the Treasury on the advice of the Capital Issues Committee.

Orders of the Day — BONUS SHARES.

I am afraid that the hon. Gentleman has just left, but I was going to tell the hon. Member for Bishop Auckland (Mr. Dalton) that the Financial Secretary had very good reason for limiting, as he did, the answer which he gave to him at Question Time. In order to make this plan watertight—and for other reasons also—I propose to prohibit the issue of bonus shares during the war, save in cases where entirely exceptional grounds exist, such as where two companies amalgamate and something has to be done to adjust the position.

While the Bill will tend to reduce spending power in the hands of the shareholder, it will tend to increase the reserves of companies built up from undistributed profits and will encourage the investment of a proportion of those reserves in Government loans.

Orders of the Day — CONCLUSION.

I had hoped very much that when my time came to an end it would be said that I never made a long speech as Chancellor of the Exchequer. It is difficult to get over the ground more rapidly, but I have now completed my main task and would like, in two or three sentences only, to pick out from this mass of details and figures two or three outstanding features. The first is this: This total of £1,234,000,000, which I am now seeking to get from revenue this year, contains a larger figure drawn from taxation than has ever been raised in 12 months in the history of British finance. Yet it is inevitable, when total expenditure mounts at the pace set by modern warfare, that taxation should not entirely keep step with it. We are bound this year, according to my calculations, to contemplate an expenditure which is at least £850,000,000 more than that of the preceding year. Towards this I am drawing from revenue £185,000,000 more than the revenue of last year, with the prospect of a further increased yield in the following year. What is the conclusion? It is this:

Saving, and the lending of savings to the State, must be proportionately increased. It is an essential part of our war policy that this should be achieved.

Provided that the zeal and persistence of our people in supporting Government loans equals the fortitude and resolution of our people in paying Government taxes, we have nothing to fear; and our financial front will hold as firmly as does every other front in the fight for victory and freedom.

Orders of the Day — CUSTOMS AND EXCISE.

BEER (EXCISE).

5.48 p.m.

Motion made, and Question proposed,

"That, as from the twenty-fourth day of April, nineteen hundred and forty, the duty of excise charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:

£
s.
d.


For every 36 gallons of worts of a specific gravity of 1,027 degrees or less
3
5
0


For every 36 gallons of worts of a specific gravity exceeding 1,027 degrees—


For the first 1,027 degrees
3
5
0


For every additional degree in excess of 1,027 degrees
0
2
6

and so in proportion for any less number of gallons;

and, in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the excise drawback allowed under that Section shall be allowed at the following increased rates:

£
s.
d.


For every 36 gallons of beer or an original gravity of 1,027 degrees or less
3
5
2


For every 36 gallons of beer of an original gravity exceeding 1,027 degrees—


For the first 1,027 degrees
3
5
2


For every additional degree in excess of 1,027 degrees
0
2
6

and so in proportion for any less number of gallons;
Provided that as respects beer of an original gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed by more than two pence for every 36 gallons the amount of duty which is shown as aforesaid to have been paid.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."—[Sir J. Simon.]

The Chairman: Before the Debate proceeds, I think it may be relevant to remind the Committee of a slight change in procedure adopted on the last Budget.


As a great many Members may not remember it or the reasons for it, it may be well on this occasion if I read a few lines from the statement which I made on the War Budget of last September:
In accordance with the usual course I have put the First Resolution from the Chair. Thereupon, all the Budget proposals are open for debate, but the exact terms of the Budget Resolutions cannot be known or be in possession of hon. Members until they have been put from the Chair. There have been complaints in the past that some inconvenience has resulted. I, therefore, suggest to the Committee that, if they approve, I should, at the conclusion of the speeches of the Leaders of the two Oppositions, put from the Chair all the Budget Resolutions and that the Committee should pass them with the exception of the last one, which will be left open in the usual way in order to keep the Debate open. I understand that that meets with the approval of the Government and the Leader of the Opposition, and if the Committee generally approves I shall be glad to adopt that course."—[Official Report, 27th September, 1939; col. 1381, Vol. 351.]
I understand that meets with the views of the Government and the Opposition, and I hope the Committee will take that course.

Mr. Tinker: Would it not be as well to put the Resolutions straight away rather than have any speeches at all? It is rather unfair for the ordinary Member to have two leading speeches and then wait until the rest are put.

The Chairman: We considered that alternative most carefully both in last September and on this occasion, and all those with whom I have conferred on the subject thought it would not be so convenient to put all the Resolutions immediately after the Chancellor's speech. I hope the hon. Member will be satisfied with the knowledge that the two courses were both considered. The proposal does not in the least interfere with hon. Members' rights to speak; they have more scope after all the Resolutions but one have been passed. Another point to be considered is that this is done partly to facilitate the opportunity of moving to report Progress when that is desired; it is not practicable to do this before all the Resolutions except the last have been passed.

5.53 p.m.

Mr. Attlee: The right hon. Gentleman has introduced his Budget with his usual lucidity. He has had a great deal of ground to cover and he has had very formidable figures to face. I do not

intend to speak at any length to-day, because, obviously, all these proposals need very careful consideration and a general balancing up of advantage and disadvantage. That really is all the balance we get in a Budget now. There is no balance of a Budget itself and that is why the atmosphere lacks something it used to have in the days before we had an unbalanced Budget. There is none of that nice consideration as to whether an odd £500,000 will just put the thing on its right side. The considerations before us to-day are the proportion of expenditure which is to be raised by taxation and the proportion to be raised by borrowing. Within the question of how much we shall raise by taxation there are considerations which are not strictly fiscal. Really a Budget to-day is an instrument for dealing with two things—one the allocation of purchasing power and the other the direction of purchasing power and, through that direction, a decision as to what should be produced.
It is under these considerations that I would look at the Chancellor's proposals. I think he was right in saying—and I hope everyone will have noticed what he said—that we have to face a change in the economy of the country. Far too many people think you can get back to the past. Things will never be the same after this war. The whole economy of the country will be changed and I would say to the right hon. Gentleman that he should not assume that the social structure of this country will be the same at the end of the war. I was interested in his words with regard to levies on war wealth. From this side we have always advocated a capital levy because we realise that what was needed at the end of the last war was far more redress in the unequal distribution of purchasing power among different classes of the community.
I turn to consideration of these proposals from the point of view of what will be effective in helping us to win the war, how we will raise all the money we need and how we will get the right things produced in the right quantities. The Chancellor of the Exchequer talked, quite rightly, of the need for avoiding inflation. None of us wishes to see inflation. He said that one of the ways of doing that was to prevent excessive expenditure. That is quite right. There is another side of it, too, and that is an increase of our production. I should have liked


to have seen a little more concentration on that because we are not yet producing all we could. We are not using all our man-power. I am all for the work of the committee which has been set up to prevent waste but remember there is a major waste and a minor waste and, not uncommonly in this House, people have salved their thrifty souls by hitting at minor waste and allowing major waste to go by. I think there is a great deal of waste in our methods of contracting, a waste of labour, and, throughout, a good deal of waste which can only be checked by the efforts of the Ministers themselves in their Departments, and not by the influence of the Treasury from outside.
I would like to say one or two words about the proposed increased taxation. From my point of view the increases in Income Tax and Sur-tax are taxes on the right lines. They are effecting a better allocation of purchasing power. The taxes on beer, spirits, tobacco and matches are taxes on luxuries, and that is going in the right direction because that is the way in which we can restrict the waste of the nation's resources of unnecessary things. On the other hand, when we come to the increase in Post Office taxes, I think it is a more doubtful proposition. It will not bring in a great deal of money when you look at the huge amount of Budget expenditure and it will irritate a vast number of people. I doubt whether it is wise, when you are calling up for service, and when there is evacuation, with the result that people want to keep in touch with each other, that you should tax the simplest method of communication. I think that will require a great deal of consideration as to whether it is worth while. We have always to consider the psychology of the people in these things. Nothing irritates people more than having to fork out 1½d. instead of 1d. There is nothing sacrosanct about a penny post, but the additional halfpenny is irritating and the 2½d. will be even more irritating. I feel bound to say that I consider this is a tax which will require a great deal of examination. I am not persuaded that it is wise to put such a heavy tax on the ordinary letter and postcard.
I forego consideration in any detail of the sales tax. It is complicated. Prima facie it does not seem to fulfil any of the conditions which I should lay down for

taxation. It does not make for a better distribution of wealth; it does not prevent luxuries, because it does not apply to luxury purchases any more than to essential purchases. In fact, it is not a really sound tax and is only a kind of handy way of getting a certain amount of money into the Exchequer. It will not assist the finances of the country, and I do not think it will meet the Chancellor of the Exchequer's aim, that is, to suppress luxury. I am glad that the Chancellor of the Exchequer has come down for voluntary savings as against compulsory savings, and I am also glad that he has met the point about the means test. That, again, is a psychological matter. I have had it from men who have devoted themselves to an examination of the question of savings, business men in the City, who do not hold any of the views which we do on these benches on the means test, but they assure me that in trying to get national savings nothing stands in the way so much as the means test. It is a psychological matter, but it also has a very practical effect as well. I was not clear as to whether the exemption was up to £375 or the full £500.

Sir J. Simon: The right hon. Member knows that £375 is what is paid for the maximum number of savings certificates which any individual may hold, and if alternative ways of saving were not treated in exactly the same way the Trustees Savings Banks or the Post Office Savings Bank would have ground of complaint. That is why I fixed £375 as being the amount of new money in all cases.

Mr. Attlee: Then, when there is £500 which has resulted from the £375 it would be an exempted amount? That is a matter for consideration. Then there is the final point in regard to dividends and the proposal of the Chancellor of the Exchequer seems to be on the right lines. I am pleased to find that the Chancellor of the Exchequer proposes to deal with the question of bonus shares. I hope that great care will be taken to see that the provisions are watertight, that no water gets through. We are suffering from an immense amount of watered capital, and unless the proposals are drastically applied then any restriction on dividends is illusory. The last words of the Chancellor of the Exchequer in which he pointed out that we were now getting control of imports and saying what should


be the subjects of expenditure, were to the effect that in war-time we are approaching a planned economy.

Sir Herbert Williams: Socialistic.

Mr. Attlee: The hon. Member does not realise that you can have a planned economy, such as the Fascist or the Nazi economy, which is a planned economy for war, and also a planned economy for the peace and prosperity of the people. We want to be quite clear what we are aiming at in our planned economy; what kind of society we want. We do not want a Nazi society, and, as far as we on these benches are concerned, we do not want to continue a society with great gulfs in it. We are quite sure that the most effective plan for winning this war would be to plan and build up more equality and justice.

6.6 p.m.

Sir Archibald Sinclair: The Chancellor of the Exchequer in his concluding sentences indicated that he thought he might be exposed to reproach for the length of his statement. There is no inclination in any part of the Committee to indulge in any such reproach. On the contrary, we are grateful to him for his clear and masterly exposition of the problem with which he is faced in opening his Budget this year. There is one small proposal to which I should like to refer because we on these benches have some parental responsibility for it, and that is the exemption from Death Duties, of the estates of merchant seamen and fishermen. We put a new Clause down to the Finance Bill in the autumn on this subject and we are grateful to the Chancellor of the Exchequer for the practical and sympathetic consideration he has given to the proposal.
The Leader of the Opposition has referred to the proposal to exempt war savings up to a total of £375 in the case of those who come under the means test of the Unemployment Assistance Board. I wonder whether the Chancellor of the Exchequer intends that concession to apply also to those people on public assistance, to those who come under the Poor Law. It may happen that a man who is under the Unemployment Assistance Board this week falls ill and is declared to be unemployable. He will then have to go to the public assistance committee. Indeed, a man who may be

saving at the present time may fall on bad times or a member of his household may fall on bad times, and his war savings may come to be taken into account when calculating the amount of assistance which is due to the household from the public assistance committee. I would ask the Chancellor of the Exchequer to make it clear whether the exemption will apply to Poor Law cases as well.
We shall have to consider carefully the full scope of the proposals the Chancellor of the Exchequer has put before the Committee. Many of them are somewhat complicated and I do not wish to plunge into a discussion of them at the moment. I will only say this, that there is one form of criticism which we shall not make, and that is that they are too drastic. On the contrary, we feel that the right hon. Gentleman deserves the support of the Committee for the measure of sacrifice for which he is calling upon the taxpayer. Indeed at this stage I am not satisfied with the size of the target at which he is aiming; as he said, it is very vague and uncertain in its outline but is it as big as we ought to make it? It seems, to me that the task to which we should set our hands now is, first of all to raise the production of the country to the highest possible pitch, and then to concentrate as much as possible of it upon our war effort and with that object to limit consumption severely. The target of our expenditure in war-time must be the maximum which can be usefully spent on our war effort. Certain figures have been put before me by gentlemen who speak on these matters with undoubted authority; they have appeared in the "Economist" and I have no doubt that the Chancellor of the Exchequer is familiar with them. They show that in this year Germany, after a series of years in which her war expenditure has been much greater than our own, is actually spending £3,200,000,000 on war expenditure. I am assured that this figure represents only her war expenditure and that the war expenditure which is carried out by her Government and which in this country would have been carried out by private individuals has been deducted before that figure has been reached.
In the case of France you will find that the French people are making an even greater effort than that to which


the Chancellor of the Exchequer is summoning the people of this country. In France 6,000,000 men were mobilised but about 1,500,000 have been sent back to their farms and industries. There are still over 4,000,000 men mobilised and it is very largely on old men and women and youths that the burden lies of maintaining the whole economic life of the country and also their war effort. Yet they were bearing till now a slightly heavier burden of taxation in proportion to revenue than the burden which we are carrying. The taxation in France on all ranges of incomes is higher and wages and salaries are lower and their hours of work are longer than in this country. I do not believe that the people of this country are content to be surpassed in the effort which they are making on behalf of the common cause by the people of France.
We shall also have to consider the economic foundation of this financial effort especially in regard to the great and, I am sorry to say, growing gap between the visible excess of imports over exports. Hon. Members will not have forgotten the speech delivered by Lord Stamp in another place a few months ago in which he said it was not so much the growth in the amount of our exports which we must watch but the growth in the difference between our visible imports and our exports. Since Lord Stamp delivered that warning that gap has continued to widen. In January, Lord Stamp referred to the worsening of the gap by 41 per cent., as compared with a year ago. To-day that gap is twice as big as it was then and that gives us some measure of the need for raising to the highest possible level the production of the country and, on the other hand, severely limiting its consumption. Nevertheless I say that the figures which the Chancellor of the Exchequer has given to the Committee are a clear and eloquent proof of the power and range of our resources; and the reception, the resigned, sometimes humorous but certainly determined reception which the Committee has given to his proposals testifies to the high spirit and firm purpose of a united Britain resolved on victory.

6.15 p.m.

Mr. Tinker: On a point of Order, Sir Albert. I understand that you are

about to put the Resolutions from the Chair. I should be obliged if you would inform me under what Rule you can do that, thus preventing the Debate on the Chancellor's statement from proceeding. Two Members of the House have spoken, but ordinary back benchers are not given an opportunity of following them. I ask for a Ruling from the Chair on that point of Order.

The Temporary Chairman (Colonel Sir A. Lambert Ward): In reply to the hon. Member, the Debate will not be in any way restricted by the fact that the Resolutions have been put from the Chair. Furthermore, this procedure has already been agreed to by the Committee.

Mr. Tinker: It has not been agreed to by the Committee, and I protest against it. There has been no Vote by the Committee. This procedure was followed last time, and it limits the rights of hon. Members. I protest against this differentiation in the status of Members of the House. It is a growing practice. I should like to have a definite Ruling from you which can be referred to again.

The Temporary Chairman: This form of procedure was suggested from the Chair by my predecessor, and it was agreed to by the Committee without a Division.

Mr. Tinker: It was not agreed to by the Committee and I protest against it.

Mr. A. Edwards: Do I understand, Sir Albert, that this form of procedure was put to the Committee to-day and agreed to, in spite of what my hon. Friend has said?

The Temporary Chairman: Certainly, it was agreed to when my predecessor was in the Chair. He made a statement about this form of procedure, and it was agreed to by the Committee.

Mr. Tinker: It was not.

Sir H. Williams: I was present when this matter was raised by the Chairman, and I must agree with you, Sir Albert, that the Committee agreed, but I think it did so under a misapprehension. I think the Committee had not the slightest understanding, when it agreed, that the Debate would be interrupted for between half-an-hour and an hour while the Resolutions were being read. If that had


been in the mind of the Committee, I do not think it would have agreed.

Mr. Tinker: I say that the Committee did not agree. I protested to the Chair. The Chairman called on the Leader of the Opposition without putting the Question from the Chair.

Question put, "That the First Resolution (Beer, Excise) be agreed to."

The Committee proceeded to a Division. Lieut.-Colonel Kerr and Mr. Munro were appointed Tellers for the Ayes; but there being no Members willing to act as Tellers for the Noes, The Temporary Chairman declared that the Ayes had it.

Motion made, and Question proposed,

Orders of the Day — BEER (CUSTOMS).

"That, as from the twenty-fourth day of April, nineteen hundred and forty, the duty of customs charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:

For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity of 1,027 degrees or less—
£
s.
d.


In the case of beer being an Empire product
3
5
5


In the case of beer not being an Empire product
4
5
5


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding 1,027 degrees:


In the case of beer being an product—


For the first 1,027 degrees
3
5
5


For every additional degree in excess of 1,027 degrees
0
2
6


In the case of beer not being an Empire product—


For the first 1,027 degrees
4
5
5


For every additional degree in excess of 1,027 degrees
0
2
6

and so in proportion for any less number of gallons;

and in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the customs drawback allowed under that Section shall be allowed at the following increased rates:

£
s.
d.


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity of 1,027 degrees or less—


In the case of beer being an Empire product
3
5
2

£
s.
d.


In the case of beer not being an Empire product
4
5
2


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—


In the case of beer being an Empire product—


For the first 1,027 degrees
3
5
2


For every additional degree in excess of 1,027 degrees
0
2
6


In the case of beer not being an Empire product—


For the first 1,027 degrees
4
5
2


For every additional degree in excess of 1,027 degrees
0
2
6

and so in proportion for any less number of gallons;
Provided that as respects beer of an original gravity of less than 1,027 degrees the amount of drawback allowable shall not exceed the amount of duty which is shown as aforesaid to have been paid, less three pence for every 36 gallons.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

6.23 p.m.

Sir H. Williams: This Resolution deals with the new tax on beer, and I am not anxious to make a speech on that new tax, because unfortunately I think it is necessary. I rise to speak on this Resolution purely for the purpose of illustrating the mess we have got into with regard to procedure. Each one of these Resolutions will now be the subject of debate, and as each Resolution is put, although we shall not be able to make a speech on the Budget as a whole, it will be in order to make a speech on the subject matter of the Resolution, and I know of no power of the Chair, except a Closure Motion, to deprive a private Member of that right. I think we are in a most unfortunate situation. The Chairman of Ways and Means, after consultation through the usual channels announced a certain procedure, but I think many of us did not at the time appreciate the significance of it. I do not think we realised that the Debate would be interrupted for about an hour while the Chairman went through the long and boring task of reading the Resolutions—it has to be done some time during the evening—and, the Debate initiated by the Chancellor and the right


hon. Gentlemen who spoke for the two Oppositions having come to an end, that we should go elsewhere, presumably, while the Resolutions were being read. The procedure is an extraordinary one; we are in a mess, and cannot get out of it.

6.25 p.m.

The Chairman: I think that I ought to say a few words on the subject in reply to what the hon. Member has said. As he said, these Resolutions have to be read at some time or another. It is quite immaterial to me, or to whoever is in the Chair, when they are read, and the only intention was to meet the convenience of the Committee. This matter was discussed to some extent a year ago as well as last September. The result was that the arrangement which was then made received the general assent of the Committee last September. I took it that I had the general assent of the Committee in the same way to-day after I had put the matter to the Committee. I venture to suggest that the hon. Member should have realised that that was the time for him to make a protest if he desired to do so. As regards the general effect of this form of procedure, the hon. Member or any other hon. Member can make his speech on any one of these Resolutions after all the Resolutions have been passed. As the Resolutions are being put, hon. Members may speak only on the one Resolution which at the time is before the Committee. Therefore, it is obvious that hon. Members will get much more freedom to say whatever they want to say on the Budget, without getting into difficulties with the Chair, by waiting till all the Resolutions have been passed. The matter is entirely in the hands of the Committee, and if any hon. Member wishes to speak on any of the Resolutions, of course he can do so.

6.27 p.m.

Mr. Lipson: As you have said, Sir Dennis, that you are anxious to consult the Committee as to the convenience of this form of procedure, may I say a few words on the matter? You reminded us that last year the Committee took a certain view, and that you assumed that this year the Committee would take the same view. A protest was made by the hon. Member for Leigh (Mr. Tinker) against this procedure being adopted this

year. With all respect, I submit that that protest was not received in such a way as to lead the Committee to think that there was any special point in supporting the protest. Therefore, may I ask you whether you would be willing now to find out whether it is the wish of the Committee to adopt this procedure, or whether it would prefer to have a general Debate on the Budget now and to have the Resolutions put later, particularly as it has been pointed out that this form of procedure differentiates between two Members of the House and other Members? Perhaps that is a point which was not clear to hon. Members last year.

6.29 p.m.

The Chairman: Perhaps it would clear up the matter if I pointed out that even up to the moment this short discussion has, in my opinion, been out of order. To discuss procedure, it would be necessary to move to report Progress. I have explained the position. It has been customary, since long before I came into the House, for all but one of these Resolutions to be put and passed formally, and it was known that hon. Members were not thereby debarred from, or limited in, making speeches as long as the last Resolution was kept open.

Question put, and agreed to.

Orders of the Day — SPIRITS (EXCISE).

Resolved,
That, as from the twenty-fourth day of April, nineteen hundred and forty, the rate of the duty of excise charged on spirits by section three of the Finance Act, 1920, in addition to the duties specified in Part III of the First Schedule to that Act, shall be increased to four pounds, seventeen shillings and sixpence per gallon computed at proof.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Orders of the Day — SPIRITS (CUSTOMS).

Resolved,
That, as from the twenty-fourth day of April, nineteen hundred and forty, the duties of customs charged on spirits of the descriptions set out in the first column of the following Table by section three of the Finance Act, 1920, in addition to the duties specified in Part II of the First Schedule to that Act, shall—
(a) in the case of spirits being Empire products, be charged at the increased rates shown in the second column of that Table; and


(b) in the case of spirits not being Empire products, be charged at the increased rates shown in the third column of that Table.

TABLE.


1. Description of Sprits.
2. Preferential Rates.
3. Full Rates.


In cask.
In bottle.
In cask.
In bottle.



£
s.
d.
£
s.
d.
£
s.
d.
£
s.
d.


For every gallon computed at proof of—


Brandy or rum
4
17
10
4
18
10
5
0
4
5
1
4


Imitation rum or Geneva
4
17
11
4
18
11
5
0
5
5
1
5


Unsweetened spirits other than those already enumerated
4
17
11
4
17
11
5
0
5
5
0
5


For every gallon of perfumed spirits
7
16
0
7
17
0
8
0
0
8
1
0


For every gallon of liqueurs, cordials, mixtures and other preparations in bottle entered in such manner as to indicate that the strength is not to be tested
—
6
12
10
—
6
16
2


For every gallon computed at proof of spirits of any description not heretofore mentioned, including naphtha and methylic alcohol purified so as to be potable, and mixtures and preparations containing spirits
4
17
11
4
18
11
5
0
5
5
1
5

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — TOBACCO (CUSTOMS).

Resolved,
That, as from the twenty-fourth day of April, nineteen hundred and forty, in lieu of the full duties of customs theretofore chargeable on tobacco imported into the United Kingdom, there shall be charged on tobacco so imported of the descriptions set out in the first column of the following Table duties of customs at the rates respectively specified in the second column of that Table:—

TABLE.


Description of Tobacco.
Rate of duty per pound.


Tobacco unmanufactured—
£
s.
d.


containing 10 lbs. or more moisture in every 100 lbs. weight thereof—


unstripped
0
17
6


stripped
0
17
6½


containing less than 10 lbs moisture in every 100 lbs weight thereof—


unstripped
0
18
6


stripped
0
18
6½

and so in proportion for any less quantity.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — TOBACCO (EXCISE).

Resolved,
"That, as from the twenty-fourth day of April, nineteen hundred and forty, in lieu of the duties of excise theretofore chargeable on tobacco grown in the United Kingdom, there shall be charged on tobacco so grown of the descriptions set out in the first column of the following Table duties of excise at the rates respectively specified in the second column of that Table:

TABLE.


Description of Tobacco.
Rate of duty per pound.



s.
d.


Tobacco unmanufactured—


Containing 10 lbs. or more of moisture in every 100 lbs. weight thereof
15
3½


Containing less than 10 lbs. of moisture in every 100 lbs. weight thereof
16
0⅞


Tobacco manufactured, Viz.—


Cavendish or Negrohead manufactured in bond
17
4⅞

and so in proportion for any less quantity.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — TOBACCO (DRAWBACK).

Resolved,
That, as respects tobacco on which there have been paid duties of customs or excise at the increased rates for which provision is made by any Resolution passed by the Committee of Ways and Means on the same date as this Resolution, drawback shall be allowed at the rates set out in the following Table, instead of at the rates set out in Part III of the Fourth Schedule to the Finance (No. 2) Act, 1939.

TABLE.


Description of Tobacco.
Rate per pound.


In respect of tobacco on which full customs duty has been paid.
In respect of tobacco on which custom duty at a preferential rate or excise duty has been paid.



s.
d.
s.
d.


Cigars
18
9
16
7


Cigarettes
18
6
16
4


Cut, roll, cake or other manufactured tobacco
18
3
16
1½


Snuff (not being offal snuff
18
0
15
11


Stalks, shorts, or other refuse of tobacco, including offal snuff
17
9
15
8

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — MATCHES (CUSTOMS).

Resolved,
"That, as from the twenty-ninth day of April, nineteen hundred and forty, there shall be charged on matches, in lieu of the duties of excise therefore chargeable thereon, the following duties of excise, that is to say:

£
s.
d.


For every 1,000 containers in which there are not more than 10 matches
0
12
9


For every 1,000 containers in which there are more than 10 matches, but not more than 30 matches
1
18
3


For every 144 containers in which there are more than 30 matches, but not more than 50 matches
0
9
0


For every 144 containers in which there are more than 50 matches:—


For the first 50 matches
0
9
0


For every additional 5 matches or part of 5 matches in excess of 50 matches
0
0
11

and so in proportion for any less number of containers.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — MATCHES (CUSTOMS).

Resolved,
"That, as from the twenty-ninth day of April, nineteen hundred and forty, there shall be charged on matches, in lieu of the duties of customs theretofore chargeable thereon, the following duties of customs, that is to say:

£
s.
d.


For every 1,000 containers in which there are not more than 10 matches
0
12
0


For every 1,000 containers in which there are more than 10 matches, but not more than 30 matches
1
16
0


For every 144 containers in which there are more than 30 matches, but not more than 50 matches
0
8
4


For every 144 containers in which there are more than 50 matches:


For the first 50 matches
0
8
4


For every additional 5 matches or part of 5 matches in excess of 50 matches
0
0
10

and so in proportion for any less number of containers.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — MECHANICAL LIGHTERS (CUSTOMS).

Resolved,
That, as from the twenty-ninth day of April, nineteen hundred and forty, the rate of the duty of customs chargeable under Section six of the Finance Act, 1928, on any mechanical lighter and on any component part of a mechanical lighter, other than a flint, shall be increased to three shillings and sixpence.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Orders of the Day — MECHANICAL LIGHTERS (EXCISE).

Resolved,
That, as from the twenty-ninth day of April, nineteen hundred and forty, the rate of the duty of excise chargeable under Section six of the Finance Act,1928, on every mechanical lighter manufactured in the United Kingdom which is complete, or which could be made complete by the addition of a flint, and on every mechanical lighter sent out in an incomplete state from the premises of a manufacturer of mechanical lighters shall be increased to two shillings and sixpence.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Orders of the Day — DRAWBACK OF DUTIES UNDER SAFEGUARDING OF INDUSTRIES ACT, 1921.

Resolved,
That, in lieu of the drawback allowed under Sub-section (1) of Section twelve of the Safeguarding of Industries Act, 1921, with respect to goods chargeable with duty under Part I of that Act as amended by any subsequent enactment, it is expedient to provide for the allowance of drawback as if such goods were chargeable with duty under Part I of the Import Duties Act, 1932, so, however, that no drawback shall be allowed on the bringing of any such goods into a shipbuilding yard.

Orders of the Day — FEES AND PENALTIES IN CONNECTION WITH LEAVE PERMITS FOR MECHANICALLY PROPELLED VEHICLES.

Resolved,
That fees not exceeding ten shillings may be charged in respect of permits issued to persons on leave in lieu of excise licences for mechanically propelled vehicles, and that those fees, and all penalties in respect of offences in relation to such permits, shall be paid into the Exchequer.

Orders of the Day — INCOME TAX.

CHARGE OF TAX.

Resolved,
That—
(a) Income Tax for the year 1940–41 shall be charged at the standard rate of seven shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds one thousand five hundred pounds, at such higher rates in respect of the excess over one thousand five hundred pounds as Parliament may hereafter deter mine;
(b) all such enactments as had effect with respect to the Income Tax charged for the year 1939–40, other than such enactments contained in the Finance (No. 2) Act, 1939, as by their terms relate only to tax for the year 1939–40, shall, subject to the provisions of such of the enactments contained in the said Act as by their terms relate only to the year 1940–41 and subsequent years, have effect with respect to the Income Tax charged for the year 1940–41.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Orders of the Day — HIGHER RATES OF INCOME TAX FOR 1939–40.

Resolved,
That Income Tax for the year 1939–40 in respect of the excess of the total income of an individual over two thousand pounds shall be charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in

respect of the said excess for the year 1938–39 respectively exceeded the standard rate for that year:
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Orders of the Day — TAXATION OF INCOME FROM FOREIGN POSSESSIONS.

Resolved,
That all income from possessions out of the United Kingdom which falls within Case V of Schedule D, other than income which is immediately derived from the carrying on of any trade, profession or vocation, or arises from any office, employment or pension, shall be taxable under Rule 1 of the Rules applicable to the said Case V (which provides for the taxation of income irrespective of the receipt thereof in the United Kingdom).

Orders of the Day — RENTS AND ANNUAL PAYMENTS.

Resolved,
That—
(a) where rent is payable in respect of a house which is unoccupied for the whole or any part of a year of assessment, the relief from Income Tax to be given by reason that the house is unoccupied shall be diminished or withheld, and the tax for the year, so far as not otherwise recovered, shall be recoverable from the landlord;
(b) persons entitled to rents under leases for 50 years or less and certain other leases shall, in certain cases, be liable to tax under Case VI of Schedule D, that liability being additional to the tax under Schedule A;
(c) no deductions of tax for the year 1940–41 or any subsequent year of assessment shall be made under the Rules applicable to Schedule A from rents under leases to which paragraph (b) of this Resolution does not apply, or from annual payments other than rent, and any such rents, and any annual payments (other than rent) to which any land is subject, shall be chargeable to tax under Case VI of Schedule D and treated for the purposes of the Income Tax Acts in all respects in the same way as patent royalties;
(d) special provisions shall be made as respects deductions of tax where payments of rent or other annual payments have been made after the fifth day of April, nineteen hundred and forty, and before the passing of the Act giving effect to this Resolution."

Orders of the Day — INCOME TAX ON DIVIDENDS PAID WITHOUT FULL DEDUCTION OF TAX.

Resolved,
That—
(a) where a dividend is paid without deduction of tax or without the full deduction of tax, the amount received shall be deemed for the purposes of the Income Tax Acts to be a net amount received in respect of a


dividend from the gross amount of which there has been made such deduction as is authorised by Rule 20 of the General Rules;
(b) preference dividends paid without deduction of tax or without the full deduction of tax shall not be treated as preference dividends as defined by Sub-section (4) of Section twelve of the Finance Act, 1930;
(c) Sub-section (2) of Section seven of the Finance Act, 1931, shall apply to all dividends other than preference dividends as so defined;
(d) the foregoing provisions shall have effect with respect to the year 1939–40 and all subsequent years of assessment."

Orders of the Day — TREATMENT OF SECURITIES THE INCOME WHEREFROM IS EXEMPT FROM TAX IN CERTAIN CASES.

Resolved,
That—
(a) in computing any profits or losses of any banking business, assurance business or business consisting wholly or partly in dealing in securities, stocks or shares which is carried on in the United Kingdom by a person not resident therein, interest, dividends and other payments to which paragraph (d) of Rule 2 of the General Rules applicable to Schedule C extends shall be included;
(b) if, in computing any profits or losses of any such business carried on in the United Kingdom by a person not ordinarily resident therein, the interest on any securities issued by the Treasury has, by virtue of an exemption from Income Tax for the interest thereon, to be excluded, there shall also be excluded any interest or other expenses, and any profits or losses, attributable to the acquisition or holding of the securities, or to transactions therein;
(c) in the case of an assurance company not having its head office in the United Kingdom, the interest, dividends or payments dealt with in paragraph (a) of this Resolution shall be included in computing the income from the investments of its life assurance fund, and if in computing that income any interest on any securities issued by the Treasury with an exemption from Income Tax for the interest thereon is excluded, a reduction shall be made in the relief in respect of management expenses;
(d) the foregoing paragraphs of this Resolution shall apply in relation to any computation for the purposes of the year 1940–41 or subsequent years of assessment irrespective of the year or period by reference to which the computation is to be made;
(e) It is expedient to declare the effect on the exemption from Income Tax enjoyed in certain circumstances as respects the interest, dividends and payments mentioned in the foregoing paragraphs of this Resolution of certain provisions of the Income Tax Acts which provide that in certain circumstances income of one person is to be deemed to be income of another person."

Orders of the Day — WEAR AND TEAR OF LEASED MACHINERY AND PLANT.

Resolved,
That the deductions for wear and tear of machinery and plant shall not be allowed to any person in respect of machinery or plant let to him unless the Commissioners having jurisdiction in the matter are satisfied that the burden of the wear and tear of the machinery or plant will in fact fall directly upon that person.

Orders of the Day — DOUBLE CLAIMS FOR CHILDREN RELIEF.

Resolved,
That where two or more individuals are, or would be but for this Resolution, entitled to relief from Income Tax in respect of the same child, the deduction mentioned in Subsection (1) of Section twenty-one of the Finance Act, 1920, shall be apportioned among those individuals and the relief, if any, to be given to each of them determined accordingly.

Orders of the Day — AMENDMENT OF S. II OF FINANCE (NO. 2) ACT, 1939.

Resolved,
That the relief from Surtax given under Section eleven of the Finance (No. 2) Act, 1939, to an individual whose actual earned income is less than his earned income as assessed but is more than four-fifths thereof shall, where the difference between his actual earned income and four-fifths of his earned income as assessed exceeds the relief from standard rate tax to which he would have been entitled under that Section if his actual earned income had been four-fifths of his earned income as assessed, be reduced by the amount of the excess.

Orders of the Day — AMENDMENTS CONSEQUENTIAL ON PROVISIONS AS TO EXCESS PROFITS TAX ON INTERCONNECTED COMPANIES.

Resolved,
That any Act of the present Session making amendments of the law relating to Excess Profits Tax in the case of interconnected companies may contain provisions (applicable to any year of assessment Income Tax for which is affected by trading results for a period with respect to any part of which Excess Profits Tax is chargeable) prescribing the way in which payments and allowances made under those amendments are to be dealt with for Income Tax purposes, and varying, in connection with such companies, the provisions of the Finance (No. 2) Act, 1939, as to the relation of Excess Profits Tax to Income Tax.

Orders of the Day — MISCELLANEOUS.

EXCESS PROFITS TAX.

Resolved,
That the extent and incidence of Excess Profits Tax (for all chargeable accounting periods) shall be varied so as to give effect to amendments as to standard profits and the computation of capital, the computation of


profits and losses, the relief to be given for deficiencies of profits, interconnected companies, and the relation of Excess Profits Tax to the National Defence Contribution.

Orders of the Day — NATIONAL DEFENCE CONTRIBUTION.

Resolved,
That the extent and incidence of the National Defence Contribution (as respects all chargeable accounting periods beginning on or after the first day of April, nineteen hundred and thirty-nine, and so much of any chargeable accounting period beginning before that date as falls on or after that date) shall be varied so as to give effect to amendments as to the computation of profits and losses, interconnected companies, and the relation of the National Defence Contribution to Excess Profits Tax.

Orders of the Day — ESTATE DUTY (AMENDMENTS AS TO VARIOUS MATTERS).

Resolved,
That the enactments relating to Estate Duty shall be amended with regard to—
(a) the charge of duty on a death where an interest limited to cease on the death has been disposed of or has determined in whole or in part;
(b) the exclusion, from the matters which may be treated as consideration for a disposition made in favour of a relative of the disponer or in favour of certain companies, of the grant in favour of the disponer of an annuity or other interest limited to cease on a death or of any similar interest, and of any operation connected with the enjoyment directly or indirectly by the disponer of any such interest;
(c) the extension of references in the said enactments to a disposition so as to include references to the creation, and to the extinguishment, of a debt or other right, the extension of references therein to property so as to include, in relation to the creation of a debt or other right, that debt or right, and, in relation to the extinguishment of a debt or other right, the benefit thereby conferred, and the treating of a debt or right which passes on a death, and of such a benefit as aforesaid which so passes, as property in which the deceased had an interest;
(d) the interests that are to be treated for the purposes of the said enactments as interests limited to cease on a death."

Orders of the Day — ESTATE DUTY (CERTAIN COMPANIES).

Resolved,
That it is expedient that further provision be made—
(a) for the charge of Estate Duty in respect of any such assets of such companies as may be specified in any Act of the present Session relating to finance in cases in which property has been transferred directly or indirectly to such a company by a person dying after the commencement of the said Act, or at his request or with his consent or acquiescence; and for treating the

property in respect of which duty is charged as property in which the deceased had an interest;
(b) for the valuation of shares or other interests in such a company which pass on a death occurring after the commencement of the said Act;
(c) as to the cases in which, and the extent and manner to and in which, Section three of the Finance Act, 1894, is to have effect in relation to transactions in which such a company or its assets, or persons interested in any manner in such a company or its assets, is or are directly or indirectly concerned."

Mr. John Wilmot: On a point of Order. Would it be permissible at this point to ask whether it is not consistent with the Rules of the House to save the time of Members and yourself, Sir Albert, to take the Resolutions as on the Paper and as read?

The Temporary Chairman (Colonel Sir A. Lambert Ward): I am informed that that is not so. In the case of Budget Resolutions they have to be read, at any rate once in full, from the Chair.

Mr. Wilmot: Thank you, Sir Albert, I have done my best.

Orders of the Day — POWER TO BORROW FOR CERTAIN FINANCIAL PURPOSES.

Resolved,
That the whole or any part of the sums required for the current financial year for the purposes mentioned in paragraph (a) or paragraph (b) of Sub-section (4) of Section twenty-three of the Finance Act, 1928, as amended by any subsequent enactment, may be provided out of money borrowed for the purpose under the National Loans Act, 1939, instead of out of the permanent annual charge for the National Debt.

Orders of the Day — PURCHASE TAX.

Resolved,
That—
(a) provision shall be made for charging a tax in respect of purchases of goods from wholesale sellers and in respect of such other transactions relating to goods as may be provided by any Act of the present Session, subject to such exceptions and limitations as may be thereby provided;
(b) the Treasury shall have power to make orders for bringing the tax into operation and for prescribing the rate of the tax from time to time;
(c) an order made by the Treasury for the purposes of the preceding paragraph shall not have effect unless it is approved by a Resolution of this House, but if approved may have effect as from such date as may be specified in the order."

Orders of the Day — AMENDMENT OF LAW.

Motion made, and Question proposed,
That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with Finance.

6.55 p.m.

Mr. Tinker: I want to speak on the Financial Statement, and I suppose I am in order now. One would have thought that on an occasion when we have to deal with a Financial Statement which has never been equalled there would have been a far better attendance in the Committee. When we are faced with vast expenditure like this it is advisable for the Committee to give full consideration to it. The Chancellor remarked that the citizens of this country would be prepared to meet any cost that the war entailed if they were satisfied that it was wise expenditure. I agree with that, but many of us are not sure that much of this money is being wisely spent. I want my remarks to go home to the Financial Secretary, so that he may find out whether I am right in my contention. Owing to the war emergency certain things have had to be done hurriedly. While hitherto we were able to send out for contract tenders, we are not now able to do that. Certain works are put into the hands of large firms without any stipulation as to the total cost. Consequently, many of these firms, from evidence that I have, are not spending money wisely. I have had information from workmen on munition works and factories that have been put up with Government help of vast waste and of material that ought to be of use to the State and looked after properly being cast on one side. We are told that people who are doing these jobs are paid on the total expenditure. That is to say, if they spend £10,000 they get so much per cent. on that amount. The more they spend the more they get, so that the greater the cost of a job the greater the amount of money that goes to the people doing the work.
When things like this are going on it cannot be expected that the citizens of the country will feel satisfied that they are getting the best value for money; and when we have the Financial Statement before us the people who are called upon to bear the cost, whether by indirect taxation or by direct taxation, have a right

to know how it comes about that money can be thrown away in this way. They are complaining to Members of Parliament that it is not right and fair that they should be called upon to pay an extra penny a pint on beer, extra on their tobacco and other extra taxes when they see the colossal waste that is taking place in munition works. If the Chancellor's words mean anything at all, I hope that he will pay close attention to the subject and not allow waste to continue under a system by which contractors are paid so much on the money spent. It may be argued that we have a costings staff watching the expenditure, and that may be, in a sense, a safeguard, but I am led to believe that it is not so very effective. We talk about the citizens being willing to bear the cost, but we must satisfy them that the money is being spent wisely, because if they are they will pay with greater heart.
A second fundamental point arising from the Financial Statement concerns the National Debt. The Chancellor said it amounted to nearly £9,000,000,000. Has anybody calculated what that means? I have done so roughly, and I find that with our population of 45,000,000, everyone has to bear a burden of £200. Every citizen has to help to pay the interest on that £9,000,000,000, which represents borrowed money. The time has come when something different must be tried. The only way of dealing with the situation is by taking the wealth from where it is. It must be in this country. If we can find money whenever it is wanted it must be in the hands of certain people. They lend it to the State, and the State pays interest on it. Every citizen, rich or poor, has to pay his quota. The rich, by getting their interest get more than they have to pay. The poor, who have no money invested, have to meet all the extra charges all the time. The Chancellor has to find £1,400,000,000 by borrowing. The time has come when the House of Commons must realise the position we are getting into. I have here some figures showing disparities in the distribution of wealth. In the "Manchester Guardian" yesterday there was a list of 10 wills. The largest estate was £143,000. The total of the 10 was £384,000, giving an average of £38,400. In the same paper to-day there is a list of seven wills. One person left


£197,000, another £190,000. The average of the seven was £65,000. Those people in their lifetime lent money to the State and got interest on that money. The National Debt grows bigger and bigger and every citizen has to bear that extra burden. The time has come when the mounting burden will have to be arrested.
There are two other points which emerge from the Financial Statement. I hope that whoever has to deal with affairs after the war will note what is happening under this Budget. Twelve months ago many of us on these benches, and others on the benches opposite, put forward a claim that old age pensioners should have a flat-rate increase in pension. The Budget then was £900,000,000. We were told that it was impossible to find the money. Everyone agreed that the old people deserved an increase, but it was said that, the extra £40,000,000 or £50,000,000 could not be found. To-day, by added taxation, we are finding £1,200,000,000, and are borrowing another £1,400,000,000, proving that when the occasion requires it money can be found. When the war is over and social legislation is required to put the country into a proper condition, I want those Members of Parliament who may be here not to be deterred by statements that the money cannot be found. The present Budget is a lesson to everybody that the wealth is there and can be found.
I do not want my remarks to be taken as suggesting that I am not in favour of the prosecution of the war. I want the war to be carried through successfully, and I want the money to be found, but while we are conscripting life for the war I claim that we ought to conscript wealth also. It is not right and fair that the ordinary citizen should have a heavy burden to bear. The rich are not being dealt with as they ought to be. The poor are bearing the biggest burden, and Parliament ought to make a greater protest against this state of affairs. Having said that I have finished, but I hope that when the next Financial Statement is made it will include something more drastic than the present one.

7.7 p.m.

Mr. Lipson: The hon. Member for Leigh(Mr. Tinker) always speaks with such sincerity that I am sure the Committee will give very careful consideration to his observations, but though

I frequently agree with him I feel that he has chosen rather an odd time to suggest that the rich are not bearing their full share of the burden of taxation.
The Chancellor of the Exchequer has well deserved the compliments which have been paid to him for the lucidity of his Budget statement. Probably there is no man in the country better able to state a case than the Chancellor of the Exchequer, and I think it is remarkable that in these days, when people do not like listening to long speeches, the Committee followed him with undiminished interest for over two hours—in fact, he was so effective that I did not realise that he had spoken so long. It is a remarkable tribute to his powers of stating a case interestingly and clearly. I think, too, that though the Chancellor of the Exchequer has a difficult task in war time he has, in one respect, an easier one, because the country is determined to win the war and is quite willing to bear any burden which may be necessary to that end. It seems to me that in war time it is the Chancellor's responsibility to see that the economic resources of the nation are not unduly dissipated.
We started this war with great economic advantages over our enemy, and it is the Chancellor's duty to see that we take full advantage of that situation. What the country would like to be assured of is that in his Budget to-day the Chancellor has taken a sufficiently long view. It is not only his duty to provide the money which is required this year for the war and for essential services but to bear in mind that in all probability this will be a long war. In any case he must be prepared to face a possibility of that kind. He has also to bear in mind the problems which will arise after the war, and his financial policy ought, therefore, to be one that will leave this country in a position to meet the problems which it will have to deal with after the war. It would be rather a poor kind of victory which left us financially so weak as to be unable also to win the peace.
The actual proposals of the Chancellor bear very heavily on all classes of the community, but there is evidence that a great deal of wasteful private expenditure is still going on, and if his latest taxation will put an end to the sort of abuse which goes on at bottle parties and at places of that kind, it will have a very salutary effect.

Mr. G. Griffiths: Who goes to these bottle parties?

Mr. Lipson: It is very disturbing, when you are calling upon people of small means to make financial sacrifices, to find that apparently some people are still able foolishly to throw a great deal of money away. The country would be more willing to accept some of the imposts if they felt that all sources of taxation which bore less heavily on ordinary people had first been used. Reference was made by the Chancellor of the Exchequer to the taxation of cosmetics, and he dismissed taxation of that kind on the ground that it would bring in a comparatively small revenue. I wonder whether he had in mind the psychological effect of omitting that source of revenue while imposing an increase in postage and other services which affect very much the lives of ordinary people.
I regret that in his search for revenue my right hon. Friend did not try to see whether money could be raised by a betting tax. It has been estimated that something like £20,000,000 could be raised in that way. Before postage increases were introduced, the possibility of a tax of that kind should have been considered. Many people are doubtful whether horse-racing and greyhound racing ought to continue at all in this country during war—I do not know whether these pursuits are still allowed in Germany during the war—but, if they are, they ought to be made to bear additional taxation in time of war. Any opposition that might be raised to taxation of this kind in time of peace would not be so serious in war time.

Mr. Benjamin Smith: Has the hon. Gentleman not lost sight of the fact that we are fighting Germany for freedom? If all the things imposed on Germany are imposed here what will be the ultimate distinction between the two countries?

Mr. Lipson: If the hon. Gentleman had listened to me—

Mr. Smith: I have—

Mr. Lipson: —he would know that I was not saving that horseracing and grey bound racing should be prohibited. I said that some people might consider that to be necessary. I suggested that, in time of war, it was a more legitimate form of

additional taxation than postage and some of the other forms of taxation that have been imposed. It is rather difficult to discuss the proposed Purchase Tax because we have not all the details before us; but a general tax on all purchases, excluding food, drink and the articles mentioned by the Chancellor of the Exchequer, might still press very heavily on the great mass of the people. A tax of this kind is unfair in its incidence and might have serious effects on the cost of living. The principal object, surely, of the Chancellor is to prevent inflation. One has to ask oneself whether any Budget proposal is likely to have an effect of that kind.
Perhaps the most interesting part of the Chancellor's speech, and in some respects the most important, was what he had to say about deferred pay. Many of the arguments that he used against compulsory deferred pay were similar to those which were used against the introduction of compulsory military service. If you say to a man that you are going to conscript him to fight and he has to make all the sacrifices that that involves—and that has been done with surprisingly little opposition in this country—I cannot see why it should be wrong to say to those who stay behind: "The State requires that what you are earning in excess of a reasonable standard shall not be taken in taxation but shall be at the disposal of the State for the time being, and will be available for you when the war is over."

Mr. Woodburn: Would the hon. Gentleman also agree that, before that stage is reached, it would be desirable to say to people who are drawing unearned income in increasing quantities that they should cease to do so?

Mr. Lipson: The hon. Gentleman is trying to draw a different issue into the matter. I am concerned with the fact that a great many people are earning more money during the war than they did before the war. The suggestion is that it is in their interests, as well as in the interests of the State, that that money should not be spent now. If it is spent during the war we shall have inflation, and those who are earning the money will be deprived of the real advantages of their increased earning, whereas, if their spending is postponed, those disadvantages will not accrue. At the end


of the war there will be available, for the individuals and for the nation as a whole, a very big amount of money, which ought to be spent. That matter is of very real importance in these days. I can well conceive that, on some future Budget occasion, the Chancellor of the Exchequer will reverse many of the arguments which the Chancellor used to-day against a scheme of deferred pay. It seems possible at present for his plan to prevent inflation to be made ineffective by those who are foolish and thoughtless and who live for the moment, desiring to spend their money simply because they have it. Therefore, more consideration will have to be given to this question.
Another advantage of the deferred pay proposal is that it carries with it the great reform of family allowances, and that, I submit, is one of the most practical ways of dealing with any increase in the cost of living. Therefore, I am doubtful whether the alternative proposal on which the Chancellor is relying will have the same advantages that can be claimed for the deferred pay scheme. The scheme of deferred pay is the most effective means of checking inflation. It will leave available for the nation at the end of the war a considerable amount of spending power. It will make possible also the introduction of family allowances.
So far as the sales tax is concerned, I hope it will be limited to luxury articles; I think it is possible for a scheme to be worked out on those lines. If we are to rely entirely on voluntary savings, I welcome the proposal which the Chancellor has made, that in applying the means test to anybody who is unemployed after the war, no regard should be taken of the first £375. If you are to have voluntary national saving, you must give it the best possible chance of success. I have evidence from my own constituency that the fear that this might be taken into account in applying the means test after the war was having a deterring effect on National Savings. I should have preferred that the Chancellor should have viewed sympathetically a scheme of deferred pay. I do not believe that a scheme of compulsory deferred pay would necessarily kill the voluntary savings any more than conscription has killed voluntary enlistment. We know that since the introduction of conscription over 300,000 men have volunteered for the Army and a great many more men would like to go into the

Army as volunteers if it were possible for them to get in. I believe that in the same way it is possible to work a system of deferred pay and carry on with the National Savings Movement as well. Although I may have been critical of some of the Chancellor's proposals, I would join with other Members of the Committee in expressing my appreciation of the courage with which he has tackled in the main the very big financial problem for which he is responsible. Although this is a grim Budget, the country will face up to it because it is determined to pay whatever price it may be called upon to pay to win the war.

7.25 p.m.

Sir Robert Tasker: When the Chancellor announced his Budget, I assumed that it was the duty of every hon. Member to make suggestions in order that money might be raised to help diminish the large deficit of some £1,400,000,000. There are one or two things which occurred to me which might be worthy of his consideration. In New Zealand they ask patriotic rich men to lend to their Government money free of interest during the war, resulting in a contribution of £1,000,000. That has not been tried here. Is it not worth while inviting rich people to do the same here, considering they are taxed to the extent of 17s. in the £. It might be worth while for them to forego the remaining 3s. and offer to lend their money to the Government for nothing. I did make some calculation, but I refrain from putting it to the Committee because I do not pose as a financial expert.
We are hearing on all hands how essential it is to practise economy. To my mind the first place to practise economy is in this House of Commons. As elected representatives we might set a good example to the electorate. It is not to be supposed that what I am going to say will be regarded with favour in certain quarters of the House, but since there is a war on, why not reduce the pay of Members of Parliament from £600 a year to £400? I personally would go much further than that; I would advocate during the war the abolition altogether of the payment of Members of Parliament. I would also abolish for the time being the tax of £12 a year for improvident Members. If only £200 a year was knocked off the pay of Members of Parliament, £120,000 per year would be


saved. There is another direction in which economy might be practised, and here I would appeal to the right hon. Gentleman who is representing the Chancellor of the Exchequer. I refer to the simplification of Income Tax forms. A tremendous waste of paper and a terrific waste of energy are involved when trying to follow them. Let me confess that the Income Tax forms are not understood by me. They are so involved that business people send them to chartered accountants to try and make the best job of it. That is not the fault of the Inland Revenue officials; it is the fault of this House of Commons. However well balanced the Budget may be, hon. Members seek concessions, and when a concession is given it leads to all sorts of complications. With regard to Surtax, I wonder whether it has ever been realised what it means. Here is a document of eight pages which have to be filled up, and here are another eight pages of notes for guidance in regard to the statement which you have to furnish. It is so bewildering that I think the Treasury might address themselves very seriously to the trying business of simplifying the form.
We are faced with a crisis in the building industry. In February there were more than 250,000 men unemployed. But that is only half the story. The figures relate to people who are in what is termed the building trade. The building industry is twice as numerous, because the ancillary trades do as much work, and occupy as much labour, as the men in what are known as the building trade. The 250,000 really means 500,000. There is no lack of material, except in one direction, and that is wood. It is not lack of labour. The labour is there and the material is there. Yet we are draining the Treasury to keep the unemployed from starvation. It seems to me that one of the root evils of unemployment is this absurd restriction on locomotion, this ridiculous control of petrol, because you are depriving the most important trade in the country of the means of transport. Hon. Members have explained from time to time that the miners are willing to work but coal is rationed. The same thing is happening in the building industry; it is being wrecked. Someone ought to be responsible, and someone is responsible. The inertia of the Minister is only a screen for inefficiency. It appears to me that

the Treasury might consider the effect on the finances of the nation of providing public assistance and the substitution of work.
Reference has been made to the taxation of betting. If one suggested that there should be Government lotteries, one would be met with a good deal of hypocrisy, but are we not always engaged in a kind of lottery? Do we not ballot for Bills and for seats in the public galleries? If it is not wrong to ballot for seats and Bills, what is there wrong in having a public lottery? Is it not resorting to an old method of obtaining money? Exemption of payment of Income Tax by building and co-operative societies should no longer be permitted. No one is allowed to spend more than £375 for 500 War Savings Certificates. Why should we not make the maximum 1,000? It would surely bring a certain amount of money to the Government. So many people are afraid to assume responsibility. They are afraid to say anything which appears to criticise the Treasury. Surely we are only doing our duty in putting these proposals forward. If they are rejected, well and good. I put these suggestions forward for what they are worth. Those who are not permitted to serve their country on the sea, in the air, or on the land want to do what they can to help the country financially. My contribution is to that end. Combatants and non-combatants in this country are resolved to surmount the scene of conflict in triumph.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Mr. Munro.]

Committee report Progress; to sit again To-morrow.

The remaining Orders were read, and postponed.

Orders of the Day — RAILWAY RATES AND FARES (INCREASE).

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Munro.]

7.39 p.m.

Mr. Ridley: On Wednesday of last week I addressed a Question


to the Minister of Transport in the following terms:
What applications he has received from the railway companies to increase their rates and fares; and whether he proposes to remit them for decision to the Railway Rates Tribunal?"—[Official Report, 17th April, 1940; col. 955, Vol. 359.]
The hon. Gentleman said he had received an application from the controlled undertakings supported by certain figures and accompanied by a request for a 10 per cent. increase in their charges. He had considered the application and had reached the conclusion that the increase was justified and he had, on his own volition and responsibility, issued an order approving the increase. I wish to draw further attention to the matter in the hope of making my position clear in this sense. The Minister is the object of my criticism, and not the railway companies. I do not, for the moment—although I may do so later—deny, or question, the need for certain increases. All I say is that sufficient evidence has not been produced to justify the increases asked for, as it would have been if the matter had gone to the Railway Rates Tribunal. I have no special reason or desire to heap opprobrium on the companies because they have asked for a 10 per cent. increase in charges. Such an increase, after all, is less than the general increase in the cost of living since last September, and there has been a smaller increase upon railway charges of 1914, than the increase in the cost of most other substantial commodities as compared with that period. On Saturday, I travelled from London to Norwich and back, and paid the same fare as I should have paid 30 years ago. It is not my purpose, primarily, to question the justification for this increase. I must, however, seriously question the methods employed by the Minister in approving them.
The Minister referred on Wednesday to something that, he said, had been approved in the White Paper Debate on 13th February. There was only one Motion before the House on that occasion. Our Motion was one of disapproval. There was no Motion positively approving the terms of the White Paper, and certainly no Motion positively approving the terms of the Minister's speech. I am not trying to make what might be called a trifling debating

point. But, as I hope to show, a point of some substance, for the White Paper contained no reference of any kind to the Railway Rates Tribunal. Obliquely it did, if you like, in paragraph 10; but only very obliquely. If the defeat of our Motion is held to be an implicit approval of the Minister's decision to abolish the Railway Rates Tribunal, it must at the same time be held to approve of the terms of the White Paper itself, so far as it obliquely referred to the Tribunal. Paragraph 10 of the White Paper reads:
Fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end.
Nobody knows where that machinery is. Nor can anybody read the statement without believing it to mean that the machinery would be some form of independent examination, before which pleadings could be made as to any application, and consideration given to ways and means. But there has been no such machinery employed by the Minister in considering this application. There is the Minister's own speech in the Debate. He said:
If it appears that an adjustment of charges is justified, the Minister will, unless he considers it in the circumstances unnecessary or undesirable—
The Minister nods his approval of his own reservation; I will say a word about that in a moment—
seek the advice of the permanent members of the Railway Rates Tribunal acting in an advisory capacity.
I do not mean this in any sense personal to the Minister, but those words represent a very deceptive reservation. Everybody thought that that undertaking meant that when the Minister received an application of this character and of this magnitude, he would, before reaching a decision, take the advice of the Railway Rates Tribunal acting in an advisory capacity. He goes further. He says:
Any representations by a representative body of users as to the level of charges will be considered by the Minister and, if necessary, referred to the consultative committee for advice."—[Official Report, 13th February, 1940; col. 641, Vol. 357.]
The Minister has done nothing of the kind. Something different may be in his mind. I do not wish to be unfair to him; but he has neither used the kind of machinery indicated in the White Paper


—the kind, I suggest, which was in the mind of every hon. Member when he read paragraph 10—nor has he taken the steps which every hon. Member thought that in these circumstances he would have taken, of at least obtaining the advice of the members of the Railway Rates Tribunal in a consultative capacity. I will meet the Minister, as far as to say that, if he had taken the view of the Tribunal in a consultative capacity and they had agreed with him, I would have modified my view for the sake of peace and harmony. But he has completely ignored them. In taking the step which he has taken, he has done something else. He has driven those of us who were prepared to give, and did give, a qualified support to the White Paper into the most severe criticism of the White Paper itself. I will tell him in a moment why I use that adjective.
First, let me say that, in my view, the suspension—the Minister used the word "suspension"—was a grave injury to sound public policy. For nearly 20 years this Tribunal has heard applications of this kind from companies and traders in public. Almost everybody could appear, sometimes, but not necessarily, with learned counsel. The proceedings were entirely judicial, and at the conclusion, the report not only said what were the findings but gave a detailed resume of the arguments and of the reasons for the decisions reached by the Tribunal. Nobody could possibly question the nature of the decisions. Occasionally, as in the case of the London Passenger Transport Board, Class C, decisions were questioned for reasons which were entirely outside the jurisdiction of the Tribunal but otherwise, as far as I know, nobody has ever questioned the fairness and the judicial character of the decisions reached. Now, the safeguard of public hearings of evidence is gone. Hearings take place in private rooms and decisions are given by a very interested party, the Minister of Transport. He has become judge and jury in his own case.
It is my further submission that this is, within the provisions of the White Paper, the Minister's case, rather than the companies' case. The companies think—as Lord Stamp said a few days ago, and as other people have said quite plainly—that in their view they would be better

off financially without the White Paper. Lord Stamp made that quite plain when he presided at the annual meeting of the L.M.S. Company. If the Minister chooses to treat that statement with mirth, I can only repeat that it is what Lord Stamp said. Even the Minister of Transport cannot question the capacity of the economic adviser to the Government. Many people think that if the companies had been left alone, they would, on their existing charges, have got somewhere nearer their standard revenue. That is the general impression among not altogether inexperienced people.
I am not arguing for a moment that that would have been a desirable arrangement; indeed, I shall be found arguing in a contrary sense in a moment or two. Whatever may be the immediate result, it will ultimately be a peculiar arrangement. It requires the companies to earn a pound for the Minister for every pound they earn for themselves. I would like the Minister to tell the House exactly what he meant last week when he said that the finance of the present situation would involve the Government in a liability of £400,000 a week, which means £20,000,000 a year, or half the £40,000,000 guarantee. Is the House asked to believe that in the present circumstances the undertakings are only earning £20,000,000 a year, the smallest amount in their long history? I refuse to believe it, and so will a great many other people. If it is true then how much more reason there is for having public confidence by public inquiry before the Tribunal. I recognise, as the Minister must, that this is no academic matter. Many working people, when prices rise, may have to economise by eating less food, but they cannot economise on less travel in going to work. There is no doubt of the resultant hardship to many working people.
In the reply which the Minister was good enough to give last Wednesday he quoted a considerable number of figures about increased cost. I do not propose to challenge the figures supplied to the House by the Minister, but he must have had some other figures within the picture. He must have had an estimate of gross revenue for 1940. If he had not, the increased-cost figures become entirely meaningless. He must have had some estimate. If he had not, on what basis


did he reach his conclusions, and if he had, why had not the House itself last Wednesday the benefit of that information? I should like to know, for it raises, in the absence of the traditional decisions of the Railway Rates Tribunal, a very serious matter of public policy in the sense that the Minister is an interested party.
How much further is this policy going and what is the Minister's financial target? The real standard revenue is £56,000,000? In order to get it, the companies have to earn £68,500,000, and the Minister takes the difference between £43,500,000 and £56,000,000. If that is his objective ultimately, then it is a preposterous and impossible one for two reasons. The sum of £56,000,000 never was a reasonable figure as the standard revenue. As far as the four groups are concerned, it is based upon the profits of 1913, a boom year. The companies were very prosperous in 1913 because their employés were very poor. If their employés in 1913 had been decently paid, their profit figure in that period would probably have been £10,000,000 or £15,000,000 less than it was, and their standard revenue would consequently be less in 1940. But it is further inexplicable because it is related to an unhealthy capital structure which needs realistic re-writing. I remember asking the right hon. and gallant Gentleman four or five months ago whether he contemplated adopting that process, and he thought that it would be quite an impossible undertaking in the period of war. I should have thought that the emergency and the necessities of war would have made such an undertaking even more necessary now than in ordinary and normal circumstances. The companies have a gross capital liability of £1,100,000,000, an overburdened liability, badly arranged, and the heaviest in the world in relation to the mileage, and a great deal of it totally unjustifiable. That amount, which is totally unjustifiable, makes just that margin which represents the difference between fairness and unfairness in the White Paper. To maintain a standard revenue objective, which, as a global figure, becomes £68,500,000, and is itself, as far as £56,000,000 of it is concerned, based on conditions which ought never to have been accepted, and to give the Minister power under a

monopolistic condition to enable or compel them to earn, not their standard revenue, but £12,500,000 more, is clearly an outrage.
I raise this matter in that sense in order, I hope, that the Minister will clearly see that the charge against him is that he has destroyed a piece of public machinery which had complete public confidence, and in its place he makes his own decisions in his own interest, and these decisions, however fair, reasonable or justified, are bound to be an object of considerable suspicion because he is known to be a deeply interested party in the matter. I have reached a conclusion that as far as the White Paper is concerned—although I did give it my qualified approval and I do not now altogether disprove of it—that a half-hearted arrangement, such as the White Paper undoubtedly is, with its divided interests in a financial sense, is bound in the end to be unsatisfactory and that it will completely break down under the pressure of conflicting interests and competing events.
The Minister referred, in reply to my Question last week, to the Debate of 13th February which took place on our Motion in favour of the public ownership of all forms of public transport. The great majority of the Members of this House sitting opposite may choose to laugh a Motion of that kind out of court, but the Government are too strong to be laughed out of court for ever. I heard a story recently of a barrister who was instructed to defend a man charged with murder and robbery with violence and on his brief were the words, "laughed out of court." It would be far better to do one of two things, either to avoid criticism, which must in these circumstances be seriously directed to him, by re-establishing for every subsequent application the Railway Rates Tribunal in its complete judicial capacity, or alternatively, or as supplementary to that, really to consider again the whole question of public transport on the basis of our own proposals, seeing how vitally necessary it is that there should be complete co-ordination, which would overcome financial interests, and give for the first time, a transport undertaking equipped to undertake a public need in its own way.

8.0 p.m.

The Minister of Transport (Captain Wallace): I certainly do not intend to quarrel either with what the hon. Gentleman the Member for Clay Cross (Mr. Ridley) has said to-night or with the way he has said it. I cannot by any means go the whole way with him, but I fully appreciate that he has addressed himself to the case, which he honestly thinks he has, with a good deal of knowledge, soberly and without heat. I, in turn, will try to put the case which I think I have, with equal absence of passion. I do not think it would be proper to go into the wider questions which he has raised in regard to the capital structure of the railways nor again into the question of some of the fundamental provisions of the White Paper. While I fully appreciate the hon. Gentleman's point that the Debate, which was by way of being on the White Paper, turned out to be on a wider problem, that was not the fault of His Majesty's Government. I should, in fact, have been very glad, and it might, indeed, have saved me from creating at least one misunderstanding, if I had been enabled to devote an hour's speech to the White Paper, and not half the time to the wider issues. The hon. Gentleman, as I understand it, wishes to challenge the Government in general, and me in particular, on three points. First, the necessity of adjusting railway charges to meet increased costs; second, the actual amount of the increase under various heads; third, and more particularly, the fact that they have been authorised under the Defence Regulations to come into force on 1st May without railway users being given the opportunity to lodge objections and argue their case.

Mr. Ridley: I am sorry to interrupt the right hon. and gallant Gentleman, but I did not say that the 10 per cent. was not justified. I said that no public evidence had been produced to justify it.

Captain Wallace: If the hon. Gentleman thinks the increase justified, so much the better. [Hon. Members: "No."] I will try, then, to meet him by attempting to justify the 10 per cent. itself. I said in the Debate on 13th February, when we were discussing the wider issues raised by the right hon. Gentleman the Member for South Hackney (Mr. H. Morrison), that the whole foundation of the financial agreement between the

Government and the railway companies was that the controlled undertakings should operate on an economic basis. In other words, that we should pay for the use of the railways as we used them and not allow liabilities to accumulate. I also said that "if increased profits are obtained, they will be obtained for the most legitimate reason—namely, because extra work by the railways has entitled them to extra remuneration." In deciding these financial terms of control—and I do not want to pin the hon. Gentleman down to having approved them, although I still think that if the party opposite had disapproved them, they might have put down another Motion—we were most anxious to avoid a repetition of the circumstances of the last war when the railways were guaranteed a fixed return irrespective of the work they did. The management, therefore, had no direct interest in receipts or expenditure; no attempt was made to maintain fares and rates at an economic level; and the consequence was that shortly after the war, when steps were taken to place the railways on a self-supporting basis, it was necessary to make drastic increases in charges.
In 1920 increases were imposed varying from 25 per cent. plus a flat addition of 3d. a ton, to 60 per cent. plus 1s. per ton, according to the class of goods. Within a few months it was necessary to impose further increases. Accordingly, passenger fares, which had been increased by 50 per cent. in 1917 with the object of discouraging travel, were further increased to 75 per cent. above pre-war rates, and the rates for merchandise were increased to 100 per cent., plus flat-rate additions of from 6d. to 1s. per ton. On top of all that, sums amounting to about £150,000,000 had to be found during and after the war to implement the guarantee of net receipts and to meet deferred liabilities, mainly as a result of failure to meet increased working costs by current increases of charges. In those circumstances it is not really surprising that the Government decided that in this war we would keep the railways solvent, and that, as they are bound to carry out the directions of the Government irrespective of the commercial advantage or otherwise of doing so, increases in working costs beyond their control must be met by such current additional charges as are justified by the facts.
The alternative to raising charges is a policy of subsidy, keeping the railway charges at an uneconomic level and thus, in fact, subsidizing industry and travel largely irrespective of whether in any particular case they happen to be contributing to our war effort or not. Moreover, a policy of that kind would have to be extended to other forms of transport in competition with the railways, as was the case in the last war. Uneconomic railway rates nearly bankrupted coastwise shipping in the last war, and to go in for a policy of first subsidising the railways and then other forms of transport would, in the view of the Government, be to follow a costly and mistaken precedent. There would probably be disastrous consequences at the end of control when presumably transport would once more become self-supporting.
In regard to one particular point the hon. Gentleman made in his speech I want to say quite frankly that a remark I made last Wednesday in answer to a Supplementary Question was completely misunderstood in more quarters than one. When I spoke of the liability to reimburse the railways by £400,000 a week, I was, of course, referring to the undertaking to increase charges to offset increased working costs. It has nothing to do with the guaranteed net revenue, which is the sole financial liability of the Exchequer under the agreement. Arguments based on the assumption that the actual net earnings of the railways were £400,000 a week below the guaranteed minimum are quite unfounded.

Mr. Watkins: Will the right hon. and gallant Member tell us what he did mean? What did that £400,000 a week mean? Did the Minister have an increased cost of £20,000,000, which he divided by 52, as there are 52 weeks in the year, which gives £400,000 a week? Is that the case? If it is not, will he tell us what it is?

Captain Wallace: I hope the hon. Member will be good enough to listen to what I have to say, as I am coming to that point in a moment or two. The criticism has been made that in view of the great increase in railway traffic since the outbreak of war there is no justification for increased charges, because, it is said, the railways must be earning en-

hanced profits. It is perfectly true that there has been a big increase in freight traffic, although the abnormal weather during the winter and particularly during February greatly reduced the tonnage of traffic which passed over the railways. But the war has by no manner of means brought increased traffic to all parts of the railway system. For instance, there has been a substantial falling off in passenger traffic, and the London Passenger Transport Board have suffered heavy losses in earning power. During the 32 weeks since the beginning of the war the gross receipts from freight traffic have increased by £13,750,000, or 24 per cent. over the corresponding period a year ago. On the other hand, passenger receipts have declined by £4,000,000, or 7 per cent. The net increase in gross receipts is, therefore,£9,750,000, or 8½ per cent.
It must not be assumed that the additional war traffic on the railways is carried without a substantial increase in expenditure. Hon. Members who have anything to do with railways know that much of this increased traffic is of an urgent character, which involves special working and serious interference with other services, perhaps more remunerative, and also entails costly adjustments and rearrangements of services. But it may be asked—although I do not think the hon. Member asked it—whether the benefit which is expected to accrue from the additional traffic which the railways are now carrying ought not to be offset against an increase in working costs.
There are several reasons for rejecting this view. In the first place, the moderate increase in gross traffic receipts is measured against a period during which the railway traffic was at an exceptionally low ebb, when the railways were working far below their normal capacity and were consequently carrying an unduly heavy burden in respect of non-variable expenditure. In the second place, if it is correct to treat the increased spread of railway non-variable expenditure as an offset against increased working costs when traffic increases, it should follow that a reduced spread of such expenditure should fall to be added to the increased working costs if traffic should diminish—owing, for instance, to damage from air raids. The effect of this might in certain circumstances well be to bring


about an increase in railway charges far in excess of the rises in the level of prices and wages.

Mr. Ridley: I am completely mystified by what the right hon. and gallant Member is saying.

Captain Wallace: I am sorry, but I must do my best to put the case before the House. Other hon. Members will be able to take part in the Debate, and at the end the Parliamentary Secretary will be able to reply.

Mr. John Wilmot: Would it not rather short-circuit the Debate if the Minister of Transport would tell us what is the net revenue rate at which he is running?

Captain Wallace: I cannot tell the hon. Member. We cannot work it out week by week, but I have given the percentage increase in gross receipts.

Mr. Wilmot: But surely they are submitted by the Railway Executive?

Captain Wallace: I will ask the hon. Member to be patient. I am asked to take this question seriously, and I am dealing with it in a serious way. I have taken a great deal of trouble to present the case to the House, and I hope I may be allowed to do so. It is not allowed for in the agreement that if the traffic falls they should be allowed to have any increase in respect of overheads in their working costs. In the third place, one of the effects of introducing an element of increased spread into the assessment of railway charges would be to diminish if not actually to extinguish the profits which must legitimately follow additional traffic. It would remove the incentive which the railways should have for securing the maximum effort. If I could control both sides of the account, it would be perfectly obvious that the railway companies could be restricted in all circumstances to the net revenue they earned last year. By allowing them to be recompensed for additional working costs which are outside their control, and by allowing them to benefit from the larger user of the railways, the railway companies, working under Government control, have a chance of earning more than they earned last year. These seemed to the Government good reasons for not re-

quiring that alterations in the incidence of the less flexible items in railway expenses, should be entered into the ascertainment of variations in working costs.
I want to turn now to the actual amount of the increases, which, under the terms of the Agreement, are to be met by increases in rates, fares and charges. That, I understand, is the second point upon which I have been challenged.
The increase in working costs is estimated by the Railway Executive Committee to be £26,750,000 in respect of the 19 months from the beginning of control up to 31st March, 1941. In the case of the London Passenger Transport Board the House will recollect that under the agreement the Exchequer bears the deficiency up to 31st December, 1939. Of this amount of £26,750,000, which the Railway Executive Committee has submitted as being a legitimate amount for recoupment by extra charges, £4,500,000 relates to the increased cost of operations under war conditions, the principal item being due to the slowing down of the movement of traffic as a result of the black-out. That is not very easy to put into pounds, shillings and pence, and I agree with the Railway Executive Committee that the estimate they have made of this particular sum should be further examined in the light of experience. This sum is not at present being taken into account.
That, therefore, leaves £22,250,000; and that is made up, as I told the hon. Member in my answer last week, of £9,750,000 increase in wage rates, £2,500,000 for allowances to employés serving with His Majesty's Forces, and £10,000,000 for increases in the price levels of materials. The estimated cost of the increase in wage rates has been arrived at by taking the number of employés concerned and multiplying these by the appropriate rates of increase. The principal item is, of course, the war advance to conciliation, salaried and workshop staff applied as from 1st January this year at an annual cost of over £6,000,000. The next largest item is represented by decision No. 6 of the Railway Staff National Tribunal—colloquially known as the Salter Award—which operated from 28th October, 1939, and accounts for £1,000,000 annually. The second main item, the allowances to employés serving in His Majesty's Forces, I think requires no justification


in this House. In September, the Government agreed that the railway companies and the Board should make up to their regular staff serving with the Forces the difference between their civil and Service pay on the same basis as the Government apply to the Civil Service.

Miss Wilkinson: Does that mean that the railway companies in fact do not pay anything towards the allowance to their staff serving in the Forces, and that the Government just pay the whole bill?

Captain Wallace: This is a legitimate increase due to the war.

Mr. Lathan: It is passed on.

Captain Wallace: These are items which, under the terms of the agreement, fall to be made up by increased fares, rates and charges.

Mr. J. Wilmot: The passengers pay them.

Captain Wallace: The increases in respect of materials are calculated by ascertaining the actual prices paid in August of last year and during the controlled period for a representative volume of the different classes of commodities used. Examples of individual increases are—rails, 22 per cent.; sleepers and crossing timbers, 40 per cent.; and canvas, 78 per cent. These increases are based upon the conditions which obtained in March. In the case, for example, of coal and coke for railway working, the price taken is only 1s. a ton over pre-war costs. Current prices are substantially higher than that, and every 1s. a ton increase means an addition to railway costs of about £700,000 a year. Taking it all round, the weighted average of the increases of costs in March, 1940, as compared with August, 1939, was approximately 17 per cent. I submit to the House that these additional expenses are matters of fact which have been proved to the satisfaction of my officers, just as, no doubt, they could be proved to the satisfaction of any other impartial tribunal.
If it is taken that those increases are proved, the Railway Agreement requires me to make such an increase in charges as will cover these additional working costs. An all-round increase of 10 per cent. in railway charges, if applied as

from 1st May, is estimated to yield an additional £18,000,000 in a full year, or £16,500,000 during the 11 months from 1st May until 31st March of next year. On the assumption that it will be possible to obtain an additional £2,000,000 between now and the end of next March from increases in road fares on the London Passenger Transport Board system—a question with which I will deal in a moment—the total increase is estimated to produce £18,500,000; that is, £3,750,000 less than the proved increase in working costs, and £8,250,000 less than the estimate of the Railway Executive Committee of the total amount which, under the agreement, should be secured by means of additional fares, rates and charges up to March, 1941.
Of course, as regards the future, the product of any given percentage increase in railway charges depends upon the volume of railway traffic, and that, in these days particularly, is governed by a number of imponderable factors. I very much hope it will be found that the increase will in practice yield more than the estimate, and accordingly, I have not attempted at present to budget for the whole increase; but this does not alter the fact that sooner or later, under the terms of the Agreement, it will have to be dealt with.
As regards the question of fares on the road services of the London Passenger Transport Board, the House will appreciate the difficulty with which we are faced in endeavouring to impose a 10 per cent. increase on traffic which consists very largely of 1d. and 2d. fares.

Mr. Lathan: Will the right hon. and gallant Gentleman kindly make clear just what the railway companies ask for? From an earlier statement which he made, I understood that they asked for a 10 per cent. increase. He now refers to a larger claim which they have made.

Captain Wallace: I will make that point clear. The railways have submitted a claim for £26,750,000 to be made good between now and the end of March next year. We have agreed that £4,500,000 should be set aside for the present, leaving £22,250,000, which I regard as having been justified. The railways have asked for a 10 per cent. increase, and they and we hope that that increase, although at the present moment it is estimated to produce £16,500,000


between 1st May and March next, will, in fact, produce a bit more. I am not anxious at this moment to invite the House to agree to the imposition of more than 10 per cent. all round.
As far as the London Passenger Transport Board system is concerned, it is very difficult to impose an increase of 10 per cent. owing to the 1d. and 2d. fares. The method of dealing with fares under 7d., as far as the four main-line railways and the railway services of the London Passenger Transport Board are concerned, follows an established practice already hallowed by the Railway Rates Tribunal; but where the great majority of the fares are 1d. and 2d. the situation presents peculiar difficulties. Hon. Members opposite will be glad to know that in this case I have sought the advice of the three permanent members of the Railway Rates Tribunal, acting in a consultative capacity, as to the most equitable means of securing the necessary quota on the London Passenger Transport Board road services, and I have asked them to hold a public hearing.
If I have correctly appreciated the feelings of hon. Members opposite, not only as expressed by the hon. Member for Clay Cross, but as I have read them in particular organs of the Press lately, they object not so much to the fact that railway charges are to be increased—certainly the hon. Member opposite did not object to that—oreven to the actual amount of the addition, as to the fact that the new charges are to be imposed without any public hearing before the Railway Rates Tribunal. I explained to the House on 13th February that it was not possible to retain the jurisdiction of the Railway Rates Tribunal over the general level of charges of the controlled undertakings, and I put it on the ground that some more expeditious procedure than that of a court was required if the terms of the Agreement with the railways were to be carried out without a time lag which might well have very unfortunate consequences for railway users.
There is, however, another reason for which I have been obliged to abrogate the jurisdiction of the Railway Rates Tribunal over the general level of charges, and that is the reason to which I referred in my answer to a Supplementary Ques-

tion last Wednesday. I hope the House will allow me to make the position clear by reminding them what are the functions of the Railway Rates Tribunal as laid down in the 1921 Act. In that Act, Parliament agreed that the four main-line railway companies were entitled to an aggregate net revenue of about £51,000,000 a year, and the duty of the Railway Rates Tribunal, as far as the general level of charges was concerned—this is the only one of its functions which has now been abrogated—was to see that they produced £51,000,000 a year, if it was possible for them to do so. That point, I think, has not been generally appreciated. The only reason that the Railway Rates Tribunal did not authorise increases in railway charges considerably beyond anything we have experienced in the last 12 years was that they were convinced that an increase of charges would not have achieved the desired object. We all know of the law of diminishing returns.
The war has made fundamental changes in the situation. The necessity for the rationing of imported fuel has affected the principal competitor of the railways, the virile and active road transport industry. If the Railway Rates Tribunal had been left with the functions Parliament gave them in 1921 so far as the general level of railway charges is concerned, they would have been bound to sanction an increase in railway charges sufficient to produce the standard revenue, if, as in my view would almost certainly be the case, they were of the opinion that the traffic would stand it. Therefore, I do not think that I was exaggerating when I stated, in reply to a Supplementary Question last Wednesday, that this particular function was abrogated more in the interest of railway users than anyone else. Of course, the hon. Member for Clay Cross, who opened this Debate, was no doubt perfectly right, in saying that Lord Stamp might consider the railways would have been better off without the White Paper. If we had no White Paper and the railways had been left to take advantage of the situation during the war years, then the Railway Rates Tribunal would have given an in crease in charges to produce the whole of the standard revenue—

Mr. Ridley: He did not refer to that.

Captain Wallace: But that is the point. I considered very carefully, in the light of what I said in the Debate on 13th February, which the hon. Member for Clay Cross has quoted perfectly correctly, whether I ought to seek the advice of the permanent members of the Railway Rates Tribunal or whether it was unnecessary to do so. I would ask the House to consider what sort of remit I could have given these gentlemen, or how far it would have been possible for them to assist me. They could not be expected to call in question the necessity of adjusting railway charges during the war, for that would upset the Agreement, nor would they have been in any better position to satisfy themselves as to the actual amount of the increases in working costs than have been the advisers of my own Department who have investigated them.
It seems to me, therefore, that all that these three distinguished gentlemen could have done in this particular case was to suggest variations in the incidence of the increase in charges—say, 20 per cent. for passengers, and only 5 per cent. for goods, or the other way about. It must also be remembered that if they were to hear evidence at all from railways users, it would be difficult, if not impossible, to limit the amount of evidence to which they would be asked to listen. Experience in relation to the Railway Rates Tribunal indicates that several months might well be needed for an inquiry of this kind. As I have already said, every week that a definite decision to implement this essential part of the agreement is delayed, an additional sum of something up to £400,000 is added to the sum which sooner or later has got to be met by increased charges. In view of this, I came definitely to the conclusion that the balance of advantage lay in favour of action at the earliest possible moment, and that I would be failing in my duty if, by seeking the advice of the members of the Railway Rates Tribunal on what was really a perfectly simple problem under the agreement, the Government were obliged later on to impose heavier charges on railway users, than would have been necessary if prompt action had been taken. Now, however, that charges are to be increased on 1st May so as to avoid what I consider to be this dangerous risk of a time lag, it is open to representative bodies of users

to make representations to the Minister of Transport in regard to the increase. I have already promised to consider such representations and, if necessary, I will refer them to the permanent members of the Railway Rates Tribunal, acting as a Consultative Committee, for their advice. I want to make it perfectly clear, however, that the product of the general 10 per cent. increase all round must be maintained.

Miss Wilkinson: What is the good of putting them to that trouble?

Captain Wallace: Because that is part of the agreement, and with great respect to the hon. Member, the House assented and did not dissent to it on 13th February. I also want to make it clear that while the functions of the Railway Rates Tribunal in regard to the general level of charges have been abrogated for the reasons I have given, and I have not thought it right to seek their advice on the general question in a consultative capacity, the functions of the Railway Rates Tribunal in regard to the individual trader remain precisely the same as they were. It is still open to traders to go to them on questions of the classification of merchandise, exceptional rates, agreed charges, and all the other things.
It has also been suggested, and I want to deal with this point now, although the hon. Member for Clay Cross did not make it, that a prospective rise in railway charges of 10 per cent. all round was not consistent with the general policy of the Government. The Government have certainly never promised or suggested that it would be possible to avoid any rise of prices as a result of the war. On the contrary, the House knows that the outbreak of war produced in itself a number of new circumstances which rendered a certain rise in prices inevitable. The rise in wholesale prices abroad, the devaluation of the pound, difficulties in shipping and some inevitable general dislocation with industry at home in the change-over from peace to war-time conditions were all causes which contributed to an early rise in prices.
In the case of railways the Agreement reached is an Agreement to provide for, at the most, no more than a modest return upon their capital, and the conclud-


ing sentences of the Chancellor of the Exchequer this evening make it clear that a further restriction is to be placed on them in that regard. It has never been any part of Government policy to subsidise rail costs, and it was therefore inescapably a term of the Agreement that an increase of rates and fares would be allowed to compensate them for any increase in working costs. The increase proposed for 1st May is, I think, the least that could be sanctioned in conformity, either with the railway agreement, or, indeed, with the decision that Exchequer subsidies could not in ordinary circumstances be made available to subsidise rail traffic. As to the method which I have adopted for imposing this increase, I have tried to show that if I had yielded to the temptation to take shelter behind the members of the Railway Rates Tribunal—and it might have been very comfortable to do so—the result would simply have been to put off the evil day and to increase the amount of the lag which sooner or later would have to be covered. The man who shivers on the brink of the sea does not find the water getting any warmer while he does so, and I saw no benefit to anybody, not excluding the railway users, in following a course so out of tune with the necessity for prompt action over every field of our national life. That is the justification for my action, and whether hon. Gentlemen opposite agree or not, I hope they will give me the credit of being perfectly frank about it.

Mr. F. Anderson: The Minister spoke about subsidies. Has he taken into account the munitions traffic which is not at the moment charged at an economic figure or at the general rate applicable to the carrying of goods by rail? Has he taken into account what is being done in that connection so far as an agreed figure goes?

Captain Wallace: Various Government Departments have been negotiating with the Railway Companies to carry their traffic on the best terms available to them in accordance with the ordinary commercial custom. I dealt with that point on 13th February. These negotiations have not all been completed. For instance, certain large Departments may feel that the volume of traffic which they

are asking the railways to carry and the regularity of it may demand some further rate concession. That is one of the reasons why I have not tried on this occasion to budget for the whole of the claims of the railway companies because there are certain items which may be subject to further adjustment up or down in the light of further working experience.

8.42 p.m.

Mr. Herbert Morrison: I listened very closely to the speech of the right hon. and gallant Gentleman, following on the admirable introductory speech of my hon. Friend the Member for Clay Cross (Mr. Ridley). I am bound to say that the more I listened to the Minister, the less clear I was as to any sort of principles upon which this agreement was framed or upon which it was being administered. I can follow that you can make an agreement on the basis that as the companies had not a statutory right, but a statutory hope, of certain standard revenues under the Act of 1921, they would be given that standard revenue. I can follow a basis upon which you get the figure of their average net earnings over a selected period of years and say that it will be made up to that. I can follow all these things, but I cannot follow what the Minister of Transport has done if the interpretation I feel like giving to his speech is what I think it may be. In that case it seems to me that this agreement is a fraud on the community, a robbery of the railway user and not a fair proposition to the taxpayer in any way.
I presume that the operative paragraph of the agreement is No. 10 in the White Paper, Cmd. 6168. It should be noted that, presumably, this is not the agreement. It is a summary of it. We are still in the funny position that the full text of the financial agreement between the companies and the Government has never been brought to the light of day. That is a funny business. It is not right. All we have got so far is a White Paper which purports to give the outline of the financial arrangement between the Minister of Transport, the four amalgamated companies and the London Passenger Transport Board. All this business vitally concerns the average citizen, possibly as a passenger, possibly as a manufacturer, or distributor, or wholesaler, and we have a right to know


the precise terms of this agreement and what it means. The more I hear the various things the Minister says and the modifications he has to make from one Parliamentary statement to another, the more uncertain I and my friends, and, indeed, hon. Members on the other side, are as to what the agreement means. I cannot quote the agreement because the House of Commons has not got it. It is a pretty monstrous position that it has not got it, and I would like the Parliamentary Secretary to tell us what is the objection to the House of Commons and the public having the full text. If it is hidden in the archives of the Ministry, I want to know why the House and the public cannot have it.
Here is paragraph 10 of the outline of the agreement, and the Minister has given an interpretation of it to-night which I do not think was made clear in the Debate of 13th February. That paragraph says:
Rates, fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end.
In the Debate of 13th February I and other hon. Members asked the Minister a number of questions about the wording of that paragraph. What does it mean? I think the general body of Members, perhaps foolishly, took the view on 13th February that it probably meant that if working costs went up, then, after taking into account the increase of gross revenue, whether from passenger fares, goods or otherwise, the Government gave an undertaking that in the light of both sides of the financial statement there would be an adjustment in charges. Now we are told by the Minister, however—and I hope he will correct me if I am wrong—that the Government have given an undertaking, and are operating the undertaking, that, whether the gross revenue goes up or not, if the companies can prove that their working costs have increased, they are entitled to increase fares and charges to the extent of the increase in the working costs. Is that right?

Captain Wallace: Captain Wallace indicated assent.

Mr. Morrison: Now we know where we are.

Captain Wallace: But that is precisely what I said on 13th February.

Mr. Morrison: I do not think the right hon. and gallant Gentleman was so precise on 13th February. Let us, however, give him the benefit of the doubt. What does it mean? We have no data or details; we have only the extemporary statement of the Minister which is made across the Floor of the House. We have no White Paper giving the alleged details and the facts. Therefore, I cannot accept as conclusive the generalised statements which the Minister has made. This presumably must be the correct interpretation of the agreement, namely, that if the working costs were estimated to have increased £10,000,000 over the year, and if the gross revenue had at the same time increased by the estimated figure of £20,000,000, the railway companies were entitled to increase fares and charges by £10,000,000 giving them a further increase of £10,000,000 over the £20,000,000. That is the agreement. That is the Government's interpretation. If that be so, I have never witnessed such a swindle on the public as this agreement in all my life.

Mr. Watkins: The Minister is wrong.

Mr. Morrison: I well understand the surprise of my hon. Friend, but the Minister made the agreement, and that is what he says. If it is to be interpreted as meaning that under the agreement, if working costs are up by £10,000,000, notwithstanding the fact that gross receipts are up by £20,000,000, the companies are entitled to a further £10,000,000 from the users of the railways—[Interruption]. This is what the Minister says, and he agrees. If that is so, the thing is a fraud and a scandal, and the Government have been guilty of conducting business with the railway companies in such a way that they have put the business and interests of the railway companies in front of the public interest. Of all the foolish, wicked agreements any Government ever made, this is about the last word, and I say that such a Government, capable of concurring with an agreement of that kind and the Minister capable of making it, ought to be cleared out of office. The thing is a positive scandal and ought never to have seen the light of day.
How are these increased costs made up? I cannot argue about all of them, like my hon. Friends who are associated with railway organisations, but there is


included £2,500,000to make up the difference between the service pay of men who have enlisted and their wages or salaries. Many public authorities and statutory companies are paying that difference. I thought the railway companies were doing it out of the goodness of their hearts and from patriotic motives, that it was to be done at the cost of their own shareholders, or at any rate in substantial part at their cost. Now I find that in their patriotism, in their desire to be considerate to their employés who join the Armed Forces, the railway companies have carefully arranged—and His Majesty's Government have helped them—that that money shall come out of the pockets of the fellow workers of those railwaymen, of the users of the railways and of the industries of the country. I have no doubt that railway investors are patriotic people, according to their lights, but the patriotism which, while theoretically making a sacrifice, passes that sacrifice on to the ordinary rank and file of the people, does not strike me as being good patriotism.
The Minister has admitted that the gross receipts of the railways have gone up. They have risen by £13,250,000 in respect of freights during the first 32 weeks. The passenger receipts have declined by £4,000,000. The net increase is, presumably, £9,250,000. It is useful to have these desultory figures which the Minister has given us, and which I hope I understand, but that is not the way to conduct public business. The Railway Rates Tribunal has not been used for reasons which the Minister has advanced, but the House and the public have not been told the details of the business. The House ought to have a White Paper giving the figures and the statistics upon which the Government's decision has been reached, and I ask the Government to give us an undertaking that such a White Paper will be produced, and it ought to include details of the Railway Agreement itself.
My hon. Friend the Member for Clay Cross has quoted what the Minister said on 13th February. The Minister gave an undertaking then that in the ordinary way the members of the Tribunal would be consulted and their advice sought, but that there might be exceptional conditions in which he could not do that. The arguments which the Minister has

adduced to-day are arguments which he ought to have put forward on 13th February, because it now becomes pretty apparent that he never meant to consult the Tribunal. His defence is that if he had formally consulted them, with the full judicial procedure, it would have taken a long time—though I should have thought that could have been adjusted; and that if the full judicial, procedure had or had not been followed they would have had to take action under the Railways Act, 1921, and allow the railway companies the full standard revenue. I do not think they ought to have the full standard revenue, and I said so on 13th February; but if it be the case—this is an argument against myself, but for the moment I am talking morals and ethics—that the Government has deliberately avoided submitting this question to the Railway Rates Tribunal in order to prevent the railway companies having their lawful statutory rights, it is slick practice at the expense of the railway companies.
If the Government came to the conclusion, as well they might, as I came to the conclusion, that the companies ought not to have this optimum standard revenue, but should be permitted a revenue bearing some relation to the real capital of the undertakings, about which we have heard from the hon. Member for Clay Cross, and also to the net revenue which they had earned over a fair period of years, that would have been a fair basis of earning-power during the war, because I do not think the companies ought to be permitted to profiteer at the expense of the community during war. The Government might have said, "You are not going to have your standard revenue; you have never had it yet and were not likely to get it; and we are not going to let you get it as an incidental result of the war." The Minister has used against the companies one administrative expedient to prevent them exercising their statutory right, which he ought to have taken away from them by regulation or law, and has used the same expedient to prevent the public getting fair play. But the joke of the matter is that, having carefully excluded the Railway Rates Tribunal from judging the case for an increase, the Minister, when he found himself faced with the more complex and tricky business of road transport fares in London—politically tricky, too, I warn the Minister—then


said, "Here is a dirty job for the Railway Rates Tribunal and I will bring them in." And he has brought them in, not to say whether an increase of London road transport charges is justified, but to let them advise him as to how to produce the extra £2,000,000 which he has evidently promised the undertakings—not whether it should be done, but how it should be done.
What is the result of all this? There will be a material increase in the fares of the travelling public, and also in the railway freight charges, which industry may pass on to the public by an increase of prices. What is the next thing which will happen? There will be a movement for increased wages and salaries. And so you go on. The Minister is here encouraging that vicious spiral which the Government have sought to avoid. He quotes the last war as a precedent for what he has done, and says that fares and charges then went up more. I know they did, but that war was a scandalous exhibition of spiral, spiral, spiral, with more or less inflation towards the end, which did nobody any good. I am sure that the trade unions are content not to profiteer out of the nation on account of the war, but to keep things steady, as long as the Government keep the cost of transport and other things steady. If the Government assist to increase the cost of living, there are bound to be applications from the trade unions for increases of wages and so on, and then we are right off again.
I do not wish to detain the House any longer, but I would conclude by expressing my agreement with the views put forward by my hon. Friend the Member for Clay Cross in opening this Debate. The public are indebted to him for so doing. I ask the Minister whether the interpretation of his action which I have given is right in substance and in fact, and whether he does not think it his duty to see that a White Paper is laid, giving the details and the facts about this business, together with the actual text of the agreements.

9.1 p.m.

Sir Reginald Clarry: I have a very great deal of sympathy with the matter which is before the House, and I think that the House will be grateful to the Opposition for the opportunity of

ventilating this very important subject, which affects everybody in the country. I noticed that the Minister, in his remarks with reference to the approach which was made by the railway companies, asked merely the rhetorical question: "What should he have offered them in answer to their request? What should he have replied to them?" I think that is the gist of the matter. I listened very carefully to the Minister's speech, and I heard no word about economy. I should have thought the obvious answer to the railway companies' approach would be: "Have you attempted to make every possible economy in administration before coming to me?" After all, there are war economies that could be made. Everybody in this country is now asked to make war economies, and surely the railway companies cannot be the only exception. I am sure there would be ways in which economies might be effected, in fuel, administration, staffing and wages. I do not mean by reduction in wages, but, for example, in stand-by jobs, where two men might take the place of a normal three. These questions should have been asked of the railway companies. I gather that the increase in revenue, during the same period as is taken for the increased cost, came to about £9,000,000. That should have been a set-off for any request made for an increase in railway rates.
I agree with the right hon. Gentleman who last spoke that the Government are encouraging the vicious spiral by granting this 10 per cent. and that it is contrary to the policy of the Government. As I understand it, that policy has been to endeavour to keep down the cost of living. To that end, the Government have subsidised food up to now to the extent of £1,000,000 a week, or £50,000,000 a year. This 10 per cent. on all rates and charges will put up the cost of living of everybody. Transport charges bear a very big relation to total costs in almost everything that we eat, use or wear, and it all has to be passed on. The Government are indirectly encouraging this spiral and are putting up the cost of living to that extent, apart from inciting the railway companies to discuss or agree with any increased charges for wages and salaries. Some thing ought to have been done in that respect.
I only wished for a few moments to lodge my protest against the steps being taken before proper investigation had been made as to economies that might have been effected, and which would have been a better way to meet any reduction in net revenue, even though the matter were left to the end of the war, under a guarantee to be adjusted then. As it is, this will give rise to a gradual increase in the cost of living and to the encouragement of the vicious spiral.

9.6 p.m.

Mr. John Wilmot: The Minister of Transport this afternoon has certainly exploded one of the major bombshells of the war. I am certain that very few people will believe that the interpretation which he has now put upon the meaning of the White Paper and the so-far-secret railway agreement is the right one. The statement about the Treasury being called upon to find means of providing another £400,000 a week has naturally been discussed in financial circles ever since the right hon. and gallant Gentleman made it last Wednesday. I have not found anybody who really believes that they were the facts of the case. Everybody thought that the Minister, in giving his answer to a Supplementary Question, had made a slip of the tongue. In reply to the most categorical questions from my right hon. Friend on the Front Bench, the Minister has supported the statement that he then made, about increased costs being made up, irrespective of increased traffics and falling overhead on-costs.
I would like the Minister to say even now whether or not this is the proper interpretation. It is almost unbelievable. If this method of dealing with big industries in war-time is typical, and if the Minister of Transport is behaving no worse than the Minister of Supply or the Ministry of Food, we really are in a monstrous state of things. What the Minister of Transport has said not only cuts across the principles of equitable policy which the Chancellor of the Exchequer laid down at the end of his Budget speech to-day, but it really states a major financial scandal. There must be some way in which, even at this hour, Parliament can assert itself and rewrite this monstrous arrangement. I believe that, even yet,

the Minister has to lay an Order. I do not think that the White Paper agreement provided that the Minister could do the whole of this thing in secret.
I would like to reinforce the very able remarks of my hon. Friend the Member for Clay Cross (Mr. Ridley) with regard to the Railway Rates Tribunal. On 13th February the Minister of Transport made another statement with regard to his intentions in this matter. It has not been quoted, and with the permission of hon. Members I would like to quote it now. It is so absolutely misleading. He said:
Although it is not possible, because of the necessity for quicker decisions than can be obtained by the machinery of the tribunal, to retain its jurisdiction exactly as it is in peacetime, we do not intend that the safeguards should be abandoned."—[Official Report, 13th February, 1940; col. 641, Vol. 357.]
This is as clear as a statement can possibly be made. He said:
We do not intend that the safeguards should be abandoned.
What are the safeguards? They are a judicial body, with experience acquired over many years. There is a public hearing—a very important safeguard—giving the right to railway users, passengers, merchants, farmers and manufacturers to make their voices heard before the Tribunal. There is also an opportunity for the Tribunal to consider the wider aspects of the case. When the Minister gave that specific undertaking that the safeguards would be preserved, were we not entitled to think that the safeguards which I have mentioned would be preserved? Within a few weeks they had been completely abolished. This deal has been done by jiggery-pokery, in the dark, on the basis of an agreement which Parliament has never even seen and as to which it was misled by the terms of the White Paper and the Minister's explanation. There is not a single Member of the House who, on the day when the White Paper was approved, really thought that the railways would get their increased costs without any question as to what the increased revenue was. [An Hon. Member: "Not even the railway directors in the House."] I doubt if they did. Parliament must attend to this matter.
The Minister said just now that it was only hon. Members on this side of the


House and the organs of the Press associated with them who took that view. But he is quite wrong. I have in my hand a copy of a journal which is in a different category altogether, the "Investors' Chronicle and Money Market Review." The learned writer in this journal is urging his readers to get into home rails as the best possible investment that he can see, but even he had not tumbled to the real truth; even he thought that there were some limits and that some consideration would be given to the rise in revenues of the railways due to the increased traffic. These falling overhead costs are being effected very largely at the expense of the convenience of the public and the service which the railway companies render, with crowded trains, reduced schedules, unpunctual runnings and enormous changes in railway service. We understand it. It is due to the war. The public are enduring these hardships of the war with fortitude and cheerfulness, but I do not think they will do so with such good grace when they know that all they are doing is to increase the profits of the railway companies whose revenues, according to the calculations of people who are usually very well informed on these matters and who if they are wrong are wrong to a small fraction over many years, are already running 30 per cent. above the average pre-war revenues. This financial writer calls the attention of his readers to the great strength of the railways' position vis-à-vis the Minister of Transport. He says:
The railway companies are in a very strong negotiating position.
When I read that phrase I remembered a speech which the Government's economic adviser made at the annual meeting of the London Midland and Scottish Railway, speaking of course in his capacity as chairman of that main line railway company. Speaking of his services to the Government, he said:
I myself, so fully responsible for the major administrative decisions here,"—
that is, of the railway board—
have been giving a large part of my time helping the Government, but it was clearly placed on record that in agreeing to help the Government I should not have to compromise in any way my trusteeship for the shareholders' financial interests. Accordingly, I have taken my full share, and an arduous one it has been, in the negotiations leading to this settlement, and these matters have never led to the slightest embarrassment.

I do not think they would lead to embarrassment. Nobody could feel embarrassed if he had been able to negotiate on behalf of the people he represented an agreement such as is now being disclosed to us to-night. I only mention this because it calls attention once again to the anomalous position in which Lord Stamp is placed. It is a great pity that so distinguished a public servant with his record should have allowed himself to be put in that position. The fact remains that the railways are in a very strong negotiating position. He says:
For, whatever happens to costs, to charges or to traffics, the lines are guaranteed by the Government, and the minimum revenue sufficient for all their prior charges. Secondly, there is the gradually expanding prospect of rising dividends. Finally, as this week's news shows, the bogy of rising costs has but limited significance for the railway companies. This is a set of circumstances unparalleled in British industrial structure. Other essential industries and services have failed completely to obtain treatment in any way comparable to this.
That is not a journal necessarily associated with hon. Members on this side of the House. It is, if I may venture to say so, the leading financial weekly. Let us turn to the pages of the "Economist," which is not associated with Members of this side of the House. The "Economist" says, commenting on this matter, that the method is objectionable and scandalous. It says, as was said by my hon. Friend the Member for Clay Cross, that nobody objects to fair play for the railways and fair play for the railway stockholders, many of whom are quite small holders of railway stock. But, as the "Economist" says, this is something more than fair play. It goes on to say:
The railways are being assisted to increase revenues by a method which forces up the cost of transport, one of the most vital elements in the price structure. Moreover, the present increase is only a beginning. It is not difficult to see what will be the next step—applications for increased wages which the companies will have no incentive to resist, and other inflationary tendencies. It would be hard to imagine a more disastrous example of economic impolicy.
To-night for the first time this agreement turns out to be something entirely different from what Parliament believed it to be when it approved the White-Paper in February last. The Minister must lay an Order, and I understand that Parliament must approve that Order. If in war-time procedure some quicker way


has been found, with all respect, it seems to me that Parliament must assert its rights and must insist upon having this Agreement upon the Table before we are bound by what has been done under it. Anything short will open the floodgates to undesirable tendencies which all of us wish to avoid. What of the munition industry? What of the aircraft manufacturers? Are they going to be given their increasing costs without any question being raised as to the rising turnover and the rising revenue? What of all the other industries in the country which have to bear, among other things, the increased cost of transport which the Minister by this agreement is inflicting on them? Are they to be allowed, in their dealings with the Government and in respect of Government contracts, to ask for their increased costs irrespective of turnover? Nothing of the kind. There we find the Minister of Transport alone—I hope he is alone; I hope other Ministers are not doing the same thing—vitiating the principles of financial rectitude, vitiating the very principles which the Chancellor laid down at the end of his Budget speech, and acting on an agreement which turns out to be something radically different from what Parliament and the people believed when it was passed.

9.21 p.m.

Sir John Mellor: I want to draw attention to one aspect of these additional authorised charges, and that is the effect upon men serving in His Majesty's Forces. Even without these additional charges, a very large number of these men suffer considerable hardship at present rates. Very many of them, even though still serving in the United Kingdom, have been stationed, through no fault of their own, through no choice of their own, very far away from their homes, and it is often extremely difficult for them to raise the money to get home on leave. In many cases, where soldiers are making allotments to their dependants, they are drawing only about a shilling a day in pay. It means, therefore, that, when they have to save up what they draw in pay, it very often requires much more than a month's drawings to get them home on leave. It is true that they have considerable concessions. They get, I think, two free warrants a year. That is good, but it is not good enough. Further, on presentation of a leave pass, they can obtain a

single ticket for half the single fare, but that is not really a great deal of help, because it is not very often for holiday purposes that either a member of the general public, or still less a member of His Majesty's Forces, has occasion to purchase a single ticket. It is not good business. The ticket upon which people normally travel for holiday purposes is the monthly return. On presentation of a leave pass a man serving in His Majesty's Forces can obtain a monthly return at the single fare, but that does not represent very much of a reduction, because the general public can buy a monthly return ticket for a single fare and one-third, so that in that case the reduction to a man serving in the Forces is not 50 but 25 per cent., and, bearing in mind that a very large number of these men are stationed so far from their homes that it may mean saving up six weeks' pay in order to get back, that reduction of 25 per cent. on the monthly return ticket is not enough.
I feel that we must really concentrate upon the price of the monthly return ticket, because that is really a sort of general index of the cost of travelling to the general public. I leave out, of course, reference to the season tickets and cheap day tickets, which only affect people travelling for certain particular purposes. I am sure the intention always was in the past that serving soldiers, sailors and airmen should travel at half rates, because, before the introduction of the monthly return ticket, they did get return tickets at half rates. That is to say, they got return tickets at half the rate that the general public had to pay. I think that privilege should be extended to the monthly return ticket and that soldiers, sailors and airmen should now be able to buy a monthly return ticket at half the price the general public pay for it. I hope my right hon. Friend will give that his very careful consideration and, far from increasing what these men have to pay now, that he will do everything in his power to reduce it, so that in no circumstances does a man serving in His Majesty's Forces have to pay for any particular kind of ticket more than half what a member of the public pays.

9.27 p.m.

Mr. Watkins: I had not intended to intervene, because I thought the point that I chiefly wanted


to make was very well made by my hon. Friend the Member for Clay Cross (Mr. Ridley), but in the course of the development of the Debate the Minister of Transport has given a point of view about the meaning of the agreement regarding Government control of the railways which astounds me. He has said many times that the interpretation which was submitted to him by my right hon. Friend the Member for South Hackney (Mr. H. Morrison) was the correct one. Even now I think he is completely wrong, and he is in this tremendous difficulty. He has either to say "I am sorry, I had not understood the agreement which I myself signed," or, on the other hand, he has to maintain that the point of view that he has recently put is correct, in which case he has undoubtedly produced all the ingredients of a public scandal of a very major kind. I understand that his case is this: "When the railway companies bring to me their balance sheet and say, 'On the expenditure side, we can demonstrate that so much more was required for labour, so much more for coal, so much more for timber and so much more for other costs,' I am going to say, 'I have a right to say, as Minister of Transport, that they can increase their charges to the public to recoup themselves for these increased costs.' On the other hand, all the additions on the income side of the balance sheet, all the millions of Government money paid in for carrying munitions and soldiers and sailors, and all the general prosperity of the railway transport industry, all the millions of money to be added to that side I, as Minister of Transport, will completely disregard." That is the interpretation that he is giving to the agreement. The railway companies can engage 10,000 new servants to cope with the increase in traffic, and, according to the Minister, they can come to the Minister of Transport and get, by increased charges on the public, a sum to meet all the wages of these new servants.

Captain Wallace: No, Sir. All they can get is an increase to cover increased costs which are entirely outside their control. If they engage 10,000 more servants, they cannot get increased charges to meet their wages, but if the rate of wages goes up, they will have a claim for increased charges to cover the difference.

Mr. Watkins: If the Minister can find any comfort in that hair-splitting, he is

entitled to it, but I believe that the general public will not see much distinction. Quite frankly, I approach the matter from the point of view of the railway worker. Our members are concerned about the good name of the railway industry. We favour the belief that the railway industry has never profiteered, that it has never overcharged the public unduly for railway services. If the Minister is to allow the railway managements to come to him from time to time and say, "We have this much extra expenditure; we want to recoup ourselves from the public to that extent, and take no account of the increased revenue on the other side of the balance sheet," that, as my right hon. Friend the Member for South Hackney said, is a wicked agreement that the Government ought not to have entered into.
As to whether the Minister was right or wrong in settling this himself, he must realise that he is an interested party. Of every pound of additional net revenue that the railways get over the £43,500,000, he will get 10s. It is to his interest—I do not mean his personal interest, but the Government's interest—to let the railway companies make huge profits, because half of those profits will come as additional grist to the Chancellor of the Exchequer's mill. That is not the right way of handling the business of the railways. If the Chancellor of the Exchequer wants money out of the railway industry, let him put a tax on all railway fares, honestly and above board. The result of this will be that the railways will get the odium; the railway workers will get some odium, too; and the Minister will get half the profits over the £43,500,000.
I ask this question because, although I have no right to speak for the railway managers, I believe that they would have preferred that this application for a 10per cent. increase should have gone to some third party for decision, or, at any rate, for an opinion. Did the railway companies come to the right hon. and gallant Gentleman and say, "We want this 10 per cent., and we want you to give it to us without consulting anybody else"? If the right hon. and gallant Gentleman could find it in his heart to be frank with the House, I believe he would say that the railway companies came to him and said, "We should prefer you to have a third-party opinion on this


and to submit the matter, at any rate in a consultative way, to the Railway Rates Tribunal."

Captain Wallace: The hon. Member has addressed a straight question to me, and I will give a straight answer. They certainly did not come to me and say anything of the kind. It seems to me that it would have been rather miserable conduct on my part to shelter behind these gentlemen, who, in my view, on the facts could only have confirmed the decision that I reached.

Mr. Watkins: The right hon. and gallant Gentleman has twice used that phrase about sheltering behind the Railway Rates Tribunal. That kind of language impresses nobody. He forgets that he is an interested party. It is to his interest to concede this 10 per cent., and because of that very reason he ought to have consulted these other expert people and got from them, at any rate, an opinion. I say frankly for myself that if he had come to this House and had said, "I did not feel, as an interested party, that I was competent to decide this thing, and I submitted the matter to the Railway Rates Tribunal; they have investigated the figures, the increased costs and the increased income of the railway companies, and, in the light of their investigations, they recommend me to concede it"—if he had come and said that, I would have accepted the 10 per cent. as being a reasonable arrangement between the railway companies and the public. But if, as an interested party, his Government have to decide the matter without any third opinion, it is an unfair way of settling the business.
Once again I appeal to the Parliamentary Secretary. I want him to state categorically the financial terms upon which the railways have been taken over under the control of the Government, and what are the terms of the arrangements which enable the railway companies to increase their charges on sanction being given to their request by the Minister of Transport. Is the acquiescence which the Minister of Transport gives to the interpretation that my right hon. Friend gave of the agreement correct and right, or not? I would like a clear and definite understanding on that point.

9.37 p.m.

Colonel Sir George Courthope: Some little time ago the hon. Gentleman the Member for Central Hackney (Mr. Watkins) interjected that there was not a railway director in the House who was prepared to get up and defend the position. I am a railway director, and I have the honour, or may be the misfortune, to be the chairman of the Committee of Railway Directors, and I would say at once, after having listened to this Debate, that almost everyone who has spoken has had an entirely false impression of the position. Most of them have spoken as though this were a demand by the railway companies to the Government. If a demand had been made by the boards of directors of the railway companies I would, inevitably, have been involved in the preparation of the claim and the making of the demand, but I never even heard of it until I saw the announcement in the Press. What has led to all this misconception is the fact that the railways are run now by the Railways Executive Committee under and for the Minister of Transport in the interests of the country. An agreement was prepared on which there was a good deal of discussion, and I want to say a few words more about that presently. I would now merely say that I had something to do with the negotiations dealt with in the White Paper, and, as far as I am aware, the White Paper is an absolutely faithful setting out and summary of the Agreement. The Government, through the Minister of Transport, are under an obligation to carry out the terms of that Agreement which they made with the railway companies.
As I understand the position, the figures which have been quoted to-night of £26,750,000 of increased expenditure and the demand for a 10 per cent. rise, which it is estimated will give £18,000,000 of increased revenue, are made in a report from the Railway Executive Committee to the Minister of Transport, whose servants they are, for the purpose of managing the railways during the war. Hon. Members opposite are wrong in suggesting that all increased labour cost can be claimed. It cannot; it is only the increased labour cost due to decisions of the Government which can be claimed. The normal increase of cost is due to the normal war traffic. It does not come into


the calculation at all and the £9,750,000 which has been referred to, is the increase of wages which the railways have to pay, due to the increased scales approved by the Ministry of Transport, to which the railway companies have no say at all. They have merely to obey orders. The other £10,250,000 which was the increase in cost of raw material due to the war is not a matter over which the railway companies have any control.
The hon. Lady opposite, with whose view I sympathise a good deal, raised the question of the increase of cost, just over £2,000,000, represented by gratuitous payments by the railway companies to serving men as the difference between their military and civil pay. Personally, I have the greatest sympathy with the suggestions made on that point. I believe shareholders would be perfectly willing to bear that burden, but when the Railway Executive have to make a return of their extra costs on running, due to the war, I do not see how they can avoid including that figure because it is, undoubtedly, extra cost due to the war. It is interesting to notice the figures set before the House. There is no room for that £2,750,000; there is £18,000,000 on one side and£26,750,000 on the other, of which £4,500,000 has been left over for further discussion. It looks to me as if the amount of just over £2,000,000, representing gratuitous payment for men serving with the Forces, has not been taken into account by the Railway Executive in asking for the 10 per cent. increase in order to meet additional war costs.
One or two other things have been mentioned to which I should like to refer. If they were not dealt with, I think they would give an impression which would be grossly unfair to the railway companies. The right hon. Gentleman the Member for South Hackney (Mr. H. Morrison) talked about the vicious spiral which, he said, the Minister was encouraging. We all wish to avoid the vicious spiral, but hon. Members opposite must not take the view that wages, and wages alone, may be put up by the Board. It is no use saying that if wages are put up it is not a vicious spiral, and that if anything else is put up it is a vicious spiral. We cannot accept that point of view. Substantial increases in wages must, in some cases, inevitably be followed by compensating increases in fares, charges or costs.
The other point made by the right hon. Gentleman was a suggestion which I have heard before—a suggestion that the capital of the railway companies was inflated and that if the companies were considered at their true capital value, there would be a great cutting down of their figures. I want to point out, as I have done before, that anybody who examines the facts will find that the method of annual replacement which has been adopted by the main line railway companies has led to a position in which the railways are greatly under-capitalised. A certain mileage year by year has been replaced out of revenue regardless of increases in cost, and a certain number of coaches and locomotives have, in the same way, been replaced out of revenue year by year. That has led to this position, that the permanent way and rolling stock on the main line railways stand on their books at less than half their cost, and it there was any adjustment of capital I have no doubt it would be found that the main line railways—I cannot speak about the London Passenger Transport Board—are substantially under-capitalised, in spite of the fact that certain items of watered capital appear in their balance sheets.

Mr. Latham: This is a very important matter. Does the right hon. and gallant Member suggest that the railways would be entitled to regard as a correct item in their capital account the original cost of the rails, and the cost of the rails which have replaced those rails?

Sir G. Courthope: What I suggest is that the railways would be entitled to regard as capital expenditure the excess by which the cost of replacing exceeded the figure in their books. The result, for instance, is that the priority stocks of the railways are secured on fixed assets which are now worth a great deal more than their original cost, and that the system of replacing them regardless of the growing annual cost has really led to a bolstering up of the assets upon which the priority shares are secured at the cost of the ordinary shareholders. I have no doubt that an examination would lead to a writing up, not to a writing down, of the capital of the four main line railway companies; and the writing up would far exceed, in my own opinion, the amount which would have


to be written down as watered capital. Let me end as I began by saying that I believe the criticisms which have been made on this Agreement are based on a misconception of the true position. It is perfectly natural and easy for persons who are not intimately concerned with the railways to make such mistakes and for hon. Members opposite to assume that because the Railways Executive includes general managers, they have put up certain figures to the Minister of Transport on behalf of the railways in order to get something.

Mr. Woodburn: The right hon. and gallant Gentleman has explained very carefully that the railway companies have been building up plant out of revenue. Is it not the case that in the normal way that revenue would have been carried to profit, Income Tax would have been paid on the profit, the balance would have been carried to reserves, the reserves would have been used for replacing Capital and would have been capital; and is it not the case that by building it up out of revenue the railway companies have been saving a payment of Income Tax on money which would otherwise have gone to profit?

Sir G. Courthope: That is a little complicated, but if I have got the same impression of what is meant by it as other hon. Members have and if that impression is the correct one, I think hon. Members will agree with me that one can not accept that proposition. When it is agreed, as it was originally, that certain capital assets, like the permanent way of a railway, have a life of several years, when provision is made annually for replacement and that provision has to go steadily up and up and up—

Mr. Woodburn: Is it not the case that there is a calculation of Income Tax every year; that every firm is allowed depreciation without the payment of Income Tax for just that purpose, and that the depreciation of the working of a railway company which is allowed before profit is charged with Income Tax, is for the purpose of replacing the capital which is worn out in the course of the year?

Sir G. Courthope: That may be true, but my experience of the Inland Revenue

is that they never allow anything to escape them. I am certain that Income Tax is charged on the full amount on which the Inland Revenue can possibly charge it. But this does not affect my point, which is that a hundred miles, say, of permanent way which stands on the books at a certain figure, and is security for so many millions of debentures, is now worth at least double the figure at which it appears on the book. Therefore, I hope hon. Members will get out of their heads the idea that the railway companies are grossly over-capitalised.
The suggestion has been made to-day, as it was made in the Debate in February, that the agreement with the railways was a gift, almost to a scandalous extent, to the railway companies and their shareholders. As one who had something to do with the negotiations, I can assure the House, as I did at the time, that the directors of the railway companies accepted that agreement most unwillingly. In our view, it would have been perfectly reasonable but for the fact that the London Passenger Transport Board, with all its road undertakings as well as its rail undertakings, had to be brought into the pool, upon which the main line railways were dependent for their chances of profit. We believed then, and we still believe, that that fact will tend to keep the distribution of profits to the railway companies down near to what is called the floor and not give it much chance of rising towards the ceiling.

9.55 p.m.

Miss Wilkinson: I think that the right hon. and gallant Member who has just spoken with such authority as chairman of the committee of railway directors in this House has put us in a further difficulty. The Minister, in reply to a question that I put to him, said very definitely, that the amount paid by the railway companies to make up the railwaymen's Army pay to their civilian pay was being passed on, whereas the right hon. and gallant Member who has just spoken has said they did not want it passed on, and that they were perfectly willing to carry the burden themselves. He went on to say that he did not think the burden was being passed on; but the Minister says definitely that it is. So we are faced with the position once again of the Minister having a different interpretation of his own agreement. I am very


anxious that these men should have their Army pay, but it is apparent now at a time when we are considering national economy in these matters, that a burden of £2,500,000, which the railway directors are perfectly willing to pay themselves, has been taken from them by the Government, and I should like to know why.
I read very carefully the speech of the Minister on 13th February. With the exception of the right hon. Member for South Hackney (Mr. H. Morrison), my hon. Friends and I are very closely connected with the railways, and I am looking at the question from the point of view of an official of the largest distributive workers' union in this country. We are concerned about this question from another aspect. When the Minister made his speech on 13th February he spoke of economies, and when we asked him why the Government had not come to some arrangement by which there was some flat or agreed rate for the carrying of goods for Army and Government purposes, his reply was that it was in the interests of economy that each agreement should be dealt with in the ordinary commercial way. I would like the House to understand what is happening, and how the taxpayer is to be mulcted. I will give an illustration, involving only a few hundreds of pounds, to show how the same principle can be carried on, involving very much larger amounts. A large number of growers of Jersey potatoes, imported to this country, decided that they would have one organisation to deal with the railway companies, and that they would make a flat-rate agreement to save a large amount of overhead costs to themselves and to the railway companies. The railway companies' reply to them was, "Oh, no, we insist that it shall be done in the ordinary commercial way." The result is that hundreds of agreements will have to be made instead of one rate, and this is at a time when we are told it is absolutely necessary to economise in money and man-power.
I wish to apply this principle to the whole question of the carriage of Government goods during war time. If the Government had made an agreement as the Government with the railway companies, they would have been in an immensely strong bargaining position. As they did not, the railway companies are in a position to play off one Department against another and to get rates from the

Government which they would not have got if they had been dealing with the Government on a flat-rate basis instead of on the ordinary commercial rates basis. We have, therefore, the position in which the Government are paying twice over. They are paying, in the way with which my right hon. Friend the Member for South Hackney dealt, and also as a commercial user, more than they might otherwise do. At the same time that the Government are showing unparalleled generosity, to put it charitably, to the railway companies, they are acting with extraordinary meanness and niggardliness towards members of His Majesty's Forces, their wives and dependants. Those of us who have northern constituencies are continually being asked to deal with cases of men who have been sent to southern camps, have exhausted their one free warrant and cannot get home, while men living near to their service are able to get home easily. It is causing a great deal of heart-burning, and if all these millions are to be handed out so cheerfully by the Minister of Transport, he might give a more generous deal to those men who are giving their lives to the country and have left their civil jobs.
There is a more pathetic class of case, namely, that of the wives whose husbands are ill. I brought up in a question the case of a woman in my constituency whose husband was ill and who applied for a free railway warrant so that she could visit him. She was told that such a warrant was not issued. She received a pathetic letter and was so worried that she borrowed the money for the fare. Fortunately, she was able to get to her husband before he died. If she had not been able to raise the money by loan, she would have been denied by the Government the right to visit her husband, who was in a dying condition. I know that the Government cannot give warrants to wives to see their husbands every time they are unwell, but in case of serious illness, as in the case I have mentioned, which is one out of hundreds that are being raised, the benefit of the doubt ought to be on the side of the wife. No one would say that it is not very much better to give the warrant and allow the wife to see her husband than to refuse the warrant and, if the wife cannot raise the money, leave the husband to die before she can get to him. These matters


seem small in the light of the millions which we are considering, but I want the Minister to realise that they cause a great deal of feeling and that something ought to be done. Though this Debate will be completely blanketed in the Press because of the news value of the Budget, I feel sure that when the public learn how handsomely the railway companies are being treated, they will expect that soldiers, sailors and airmen, and their wives, shall receive more generous treatment in the matter of railway warrants.

10.5 p.m.

Mr. Lathan: I should like to add a word to commend the suggestion of the hon. Lady the Member for Jarrow (Miss Wilkinson), because I know that railway men, equally with others, are utterly unable to understand what seems to be the extraordinary meanness with which men serving with the Forces, and their relatives, are treated in the matter of railway facilities. The railway organisation with which I am connected has made representation in that sense to the Ministry of Transport and would desire to support the expression of opinion which has fallen from the hon. Lady.
The Debate on this subject has reached what I think hon. Members will agree is almost a painful stage. It reached that situation some time ago, and I have no desire to add to the pain and agony of those who have been compelled to listen to what has been said. The right hon. and gallant Member for Rye (Sir G. Courthope) made an interesting contribution to the Debate, and I hope he will forgive me if I say that I do not think he said anything which was very illuminating from the railway companies' point of view or which would enable us to understand the agreement which has been reached between them and the Ministry of Transport. He chided us with failure to appreciate it, and charged us with lack of sympathy. We desire that the railway companies should be treated fairly, but we also want the public to be treated fairly. He told us that until he saw the announcement in the papers he, although a railway director, and chairman of the directors in this House, had no information about the arrangement which had been made by the Ministry of Transport.
I will not follow him in his involved argument affecting what is an important

aspect of the railway situation vis-à-vis the public, the charges, railway employés'pay and other things, and that is the capital position of the railway companies; but I think I could extract from him some measure of assent to the suggestion that whatever may be said about replacements and the rest the real capital value of the railways is their ability to earn profits, and judged from the standpoint of their net profits in recent years—and I speak as one who has worked for them as well as against them in that I have on occasion found myself in conflict with them—I think it is fair to say that their capital value would be assessed by all fair judges at much below the figure at which it stands in their balance-sheets to-day.
Reference has also been made to the control of the railways by the Minister of Transport. As one who had experience of railway control in the last war, I say that the measure of actual control from the Ministry, except perhaps in matters of high policy, is limited and docs not extend to the operation of the railways. As the right hon. and gallant Member is well aware, the railways are being run to-day, under the Executive Committee, by precisely the same people as ran them before. The same policy, the same influences are at work in the conduct of the railways. From my experience from 1914 to 1920 or 1921 I should be disposed to say that so far from the influence coming from the Ministry of Transport it frequently comes much more emphatically from the office of the Railway Executive Committee. The Minister of Transport could, with advantage, read up the facts in relation to the conditions which existed in the last war, which he apparently allows to influence him in his attitude towards rate advances now.
I speak now from memory and am therefore subject to correction. My recollection is that, during the last war, there were very few increases in railways rates. The increases which took place came in the early years following the last war. During the period of that war, the railway companies were guaranteed a net income, on the basis of the year 1913, which, as my hon. Friend the Member for Clay Cross (Mr. Ridley) has pointed out, was a boom year. The conditions at the beginning of the period of the war were regarded as very favourable to the railway companies, although, at a later stage, it became necessary to give


attention to their justifiable claims. Many people, and among them those closely associated with the railway companies, believed that the settlement which was ultimately made with the railway companies in the matter of replacements and renewals, was a rather good deal, and that the railway companies were left no ground for complaint from that point of view.
Surely the Minister of Transport does not suggest that the increases which were made necessary in post-war years, in railway rates to enable the railway companies to carry on with a measure of satisfaction, arose out of acts of commission or omission during the war. They arose, I think he will agree, out of the distressed conditions attached to the early post-war years. As we know, the railways always reflect the conditions of trade and commerce in the country, and it was that situation which caused them to seek to increase their rates, rather than anything which happened in the war period.

Captain Wallace: I do not want to be in the least unfair or to press any argument further than it can fairly be pressed. I accept what the hon. Gentleman says about conditions after the last war, but the fact remains that the kernel of our case to-night is that the policy pursued during the last war simply put off the evil day and presented the taxpayers of that time with a very large liability after the war.

Mr. Lathan: The evil day arose after the war was over, and not because of the situation which had existed during the war. I believe I can say that the railways did not call for increases during the war period. The right hon. and gallant Gentleman was asked about the remission of this case, as my hon. Friend so strongly urged, to the Railway Rates Tribunal. If that procedure had been followed, as we urged in the general interests of the community and, we believe, in the interest also of the railway companies, the reflections which are now cast upon it, and the suspicions which are entertained in regard to the disposition to exploit the community could not then have been made.
We believe that a claim should have been lodged by the railway companies.

The claim would have been open to public inspection, and anybody concerned or interested could have ascertained the facts in regard to it. By the processes of inquiry, investigation, pleading and cross-examination which take place at the tribunal, there would have been an ascertainment of the facts of the case. The railway companies would have had an opportunity of justifying their claims, and, as has been the case with other claims before the Tribunal, there would ultimately have been a report and recommendations to make the position clear, at any rate, if not acceptable, to all the parties concerned. The case which has been made by my hon. Friend the Member for Clay Cross is that the Minister has made a serious mistake in the action which he has taken in failing to utilise the services of the Tribunal, or, at any rate, in not summoning them. I hope that the Parliamentary Secretary in replying for the Ministry will be able to give the House an assurance as to the policy which will be adopted in future.

10.15 p.m.

The Parliamentary Secretary to the Ministry of Transport, (Mr. Bernays): The hon. Member for the Park division (Mr. Lathan) has said that this Debate has caused pain and agony. It certainly has not caused pain and agony to my right hon. and gallant Friend and myself. My right hon. and gallant Friend and I are very glad to have this opportunity of doing what we can to put right certain misconceptions which appear to exist in the minds of hon. Gentlemen opposite as to this Agreement. I would like, first of all, to deal with one or two direct questions put to me by the right hon. Gentleman the Member for South Hackney (Mr. H. Morrison). He asked me, first of all, why we have not got the complete Agreement in front of us. The reason is that the Agreement is still being drafted. It is a very complex and complicated question, and what we have here are the heads of agreements; to these heads of agreements both the Government and the railway companies are bound. The right hon. Gentleman asked me further whether my right hon. Friend would consider the publication of a White Paper. In answer to that, I would say that all the facts have been communicated to the House. The actual increases in cost in the past, the estimates of future increases in cost and the estimated yield


of increased charges have been stated and the figures can only be approved by an accountant's examination, which has been done in the finance Department of the Ministry of Transport. In these circumstances my right hon. and gallant Friend really feels that a further White Paper would be of no value to the House.

Miss Wilkinson: If the House itself thinks that a White Paper would be of value, would it not be a good thing to have it? Have we to take the Minister's judgment of what he thinks we should have?

Mr. Bernays: We have to save paper in these days, and in any case, the only thing a White Paper could possibly give would be the figures which my right hon. and gallant Friend has already given.

Mr. Ridley: I do not wish to be unkind to the hon. Gentleman, but he is making in this Debate a series of new disclosures. An Agreement which the House thought had been terminated by the White Paper is now in process of being terminated at some non-definable date. When agreement has been reached, surely it is possible for the Minister to lay the Agreement on the Table of the House or to produce a White Paper which would embody it.

Mr. Bernays: Certainly we will consider laying before the House this extremely complicated Agreement, but the drafting is not yet completed. The hon. Gentleman said that there were matters of which the House was not aware, but during the Debate on the original Agreement it was fully understood that the White Paper contained the heads of agreement.

Mr. Ridley: Nothing of the kind.

Miss Wilkinson: Are we to understand that the White Paper is refused and that you will not let us have that Agreement?

Mr. Bernays: There is no question of there being anything in this Agreement which the House does not know already. It is simply a question of drafting, and the full draft of the Agreement is not ready to place before the House. There will not be anything in the Agreement—

Miss Wilkinson: In view of the misstatements that have been made, can we

have from the Minister an assurance that when that Agreement is signed this House shall have it?

Mr. Bernays: No misstatements have been made. I can assure the hon. Lady that due consideration will be given—

Miss Wilkinson: We do not want considerations.

Mr. Wilmot: Does the hon. Gentleman mean that money is being paid away in spite of the fact that the Government are not committed to pay it away and that the railways do not expect to get it?

Mr. Bernays: I have said the Government are committed by the heads of agreement and by the exchange of letters which has taken place.

Miss Wilkinson: Are we to have that Agreement?

Mr. Bernays: I have already given the answer. If it is possible to put it in a convenient form, most certainly. The Debate, strange to say, has centred not so much on the increased charges as on the procedure by which these charges have been increased. It is reasonable to ask why if such strong exception is taken to the Agreement now, it was not more strenuously opposed at the time of its inception. I contend that there is nothing in the Agreement which was not fully understood by the House. My right hon. and gallant Friend made the position perfectly clear and I am astounded at the main charge of the right hon. Gentleman the Member for South Hackney that the House had no knowledge that increasing costs would be met by increased charges.

Mr. Wilmot: That is not what he said.

Mr. Bernays: It is quite plain in paragraph 10 of the White Paper. My right hon. and gallant Friend, also in his speech of 13th February, made the situation quite clear. He said:
I turn to the major question of charges, which is of paramount importance to the consuming public. We intend, so far as charges are concerned, that the controlled undertaking shall operate upon an economic basis. This means the adjustment of charges to variations in working costs, including wage rates, prices of material and other circumstances arising directly out of the war, such as the cost of making good war damage, or in the case of the Transport Board, the cost of making good the loss of earnings."—[Official Report, 13th February, 1940; col. 640, Vol. 357.]


I contend that that was a very plain statement. The right hon. Gentleman will realise that it is not fair to say it was a fraud and a scandal and that my right hon. and gallant Friend was concealing something from the House. The whole four stages of the revenues of the railway companies under the Agreement depend on the fact that increased working costs beyond the companies' control are to be met by increased charges. It is that which gives them their incentive for economy and for enterprise. Against receipts from additional traffic must be set the costs of working this traffic. This is apart from the elements of increased prices, and is not recovered through increased charges. The sums recovered through increased charges merely recoup to the companies the amount of their increases in costs, leaving profits to depend upon the increased work done. It is, therefore, I suggest, quite misleading to add the increases in gross receipts to the increases in costs, as it has been suggested should be done. I know there is an important point in the minds of hon. Gentlemen with regard to the spread on overheads; they argue that they ought to be taken into account. I will deal with that point later.
I really do not think that, with regard to consultation with the Railway Rates Tribunal, hon. Gentlemen can say that they were not aware that they were giving the power to the Minister of adjusting rates and fares to the increases in costs. If I may say so, a lot of wild words have been used on this subject. The hon. Member for Clay Cross (Mr. Ridley), for instance, said that everybody thought that the Minister would take the advice of the Railway Rates Tribunal. But he cannot have included in "everybody" even the Members on his own Front Bench, because the right hon. Gentleman the Member for South Hackney was fully aware of the position. The right hon. Gentleman said in the Debate:
The adjustment of fares, rates, and charges will presumably be a matter for decision by the Railway Executive with the concurrence of His Majesty's Government, and presumably the user of the railway, whether passenger, trader, merchant, or what not, will not have his customary remedy of going before the Railway Rates Tribunal and arguing his case before the railway companies get permission, as soon as they do get permission, to make an increased charge."—[Official Report, 13th February, 1940; col. 62.5, Vol. 357.]

Mr. Ridley: Since I have been challenged, might I say that the statement by my right hon. Friend was made before the statement of the Minister to which I referred? The Minister, in the statement which he made, subsequent to my right hon. Friend's statement, did give the general impression that there would be a reference to the members of the Tribunal.

Mr. Bernays: The hon. Member cannot get away with that. In fact, as he knows, the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) wound up the Debate, after the Minister had made his statement, and he used these words:
The pre-war machinery has gone by the board, and there is nothing left but the railways and the Government to decide what changes, if any, are justified in fares, rates, and charges."—[Official Report, 13th February, 1940; col. 711, Vol. 357.]
Therefore, I do not think it can be contended that my right hon. and gallant Friend in any sense deceived the House on that matter. I think it is very unfair of hon. Members to accuse my right hon. and gallant Friend of committing some form of what I think the hon. Member called "jiggery-pokery." Hon. Members must admit that my right hon. and gallant Friend, in raising the rates and charges without consulting the Railway Rates Tribunal, is acting within powers which were fully explained and understood at the time the Agreement was adopted and approved by this House.

Mr. H. Morrison: I am sorry, but the hon. Gentleman is now relying on the observations of opponents of His Majesty's Government. We have many unkind things said about us, but nothing so bad as that. I must remind him of what the Minister said. He said this did not mean that the members of the Tribunal would be set aside, but that, on the contrary, he would make use of them.
This is what he said:
If it appears that an adjustment of charges is justified the Minister will, unless he considers it in the circumstances unnecessary or undesirable, seek the advice of the permanent members of the Railway Rates Tribunal acting in an advisory capacity."—[Official Report, 13th February, 1940; col. 641, Vol. 357.]
It is clear from that statement that the Minister contemplated that he would seek their advice unless there were exceptional circumstances.

Mr. Bernays: I do not think that that view can be taken of that statement at all. Certainly one of the hon. Gentlemen who sits by the right hon. Gentleman on that bench did not take that view. My right hon. and gallant Friend said definitely that:
It is not possible under the stress of war conditions to retain the jurisdiction of the Railway Rates Tribunal over the general level of charges."—[Official Report, 13th February, 1940; cols. 640–641, Vol. 357.]
He only said that he would consult if he thought it was necessary, and he did not think it was necessary. In face of that, really it is a little absurd of the hon. Gentleman opposite to contend that my right hon. and gallant Friend has in some curious way deceived the House on this question. The right hon. Gentleman the Member for East Edinburgh did not think it was conflicting; he quite understood the position.

Mr. H. Morrison: Misinterpretation.

Mr. Bernays: As the Opposition always do when it suits them. There is a considerable misconception as to the nature of the Railway Rates Tribunal. It is argued by the hon. Member for Clay Cross as if in some way it represented the voice of the user. [Interruption.] I was not attributing these actual words to the hon. Member for Clay Cross.

Mr. Ridley: Really, the hon. Member should not resent being interrupted. What I said was that regardless of the position of the Tribunal—I never discussed that at all—it received an application, heard evidence from every party, considered it and reached its decision judicially.

Mr. Bernays: I am sorry if I have given the medicine to the wrong patient. It was the hon. Member for Kennington.

Mr. Wilmot: Not at all.

Mr. Bernays: Last Wednesday the hon. Gentleman asked why the voice of the user had not been heard?

Mr. Wilmot: That is a very different thing. If the hon. Gentleman is not capable of appreciating the difference between a judge acting as judge and a judge hearing evidence, I cannot help him. I said the voice of the user was entitled to be heard before the Tribunal. My right hon. Friend is good enough to

give me the actual words. What I said was:
Does the right hon. and gallant Gentleman appreciate that, by abolishing the judicial protection of the railway users which the Railway Rates Tribunal afforded, he is getting into a position where only one side of the case is being heard."—[Official Report, 17th April, 1940; col. 956, Vol. 359.]
Surely it is perfectly clear. I was asking that the safeguards of the judicial tribunal should be maintained, as the Minister promised, on 13th February that they would be.

Mr. Bernays: That was precisely the point I was trying to make. The additional protection of the hon. Gentleman was asked for the users of the railways. Otherwise there does not seem to be any point in his making such a point about consulting the Railway Rates Tribunal if it is not for the purpose of helping the user. That is the whole point of the case that hon. Members opposite are making to-night. My argument is that only to a limited extent is it true that it has afforded protection. It is the function of the Railway Rates Tribunal to see that these charges are not made on a scale that would have brought the railways' income above the standard revenue. At the same time it was its statutory duty to impose increased charges to produce that standard revenue if it thought the traffic would bear the increased charges. Therefore, the judicial protection of the Railway Rates Tribunal would not have operated in present circumstances. If the Railway Rates Tribunal had been permitted its unfettered pre-war powers, the community would have been faced with something much more formidable than a 10 per cent. increase in railway charges.
What, in fact, could a consultation with the Tribunal have achieved? The items that justified the increase have been fully explained by my right hon. and gallant Friend. They are facts; they are not subjects for argument and cannot be disputed. Take the main items—£9,750,000 for increased wages and £10,000,000 for the increased cost of materials and commodities purchased by the railway companies. This latter amount is made up of ascertained price increases, including the cost of steel, timber, coal, electricity, gas, etc., all controlled by the Government. Then there is the £2,500,000 for allowances for employés serving with the Forces. I am surprised to hear arguments,


put forward by the other side, that these allowances ought not to be paid for by railway users, particularly when this argument comes from the right hon. Gentleman the Member for South Hackney. As the leader of the most important local authority in the country he has, I know, arranged for the payment of allowances to employés of the London County Council who are with the Services. Who is paying for that? It is coming out of the rates, and why should not allowances to railway employés come out of the railway users?

Mr. H. Morrison: Where else can they come from? Our only source of revenue is the rates. If I was a private profit-making company and wished, from patriotic motives, to act in such a way, I could pass it on to the consumer or sacrifice myself as a capitalist and shareholder, and I say that that is where it ought to come from. The right hon. and gallant Gentleman the Member for Rye (Sir G. Courthope), I understood, did not dissent from the view that the railway companies should bear part of the cost of such allowances, and it seems that the Minister is worse than the railway director.

Mr. Bernays: Where else can it come from unless out of the scanty profits made by the railway companies before the war? The right hon. Gentleman talked as if the railways were profiteers and making a good thing out of the war, but we must remember that before the war they were in such a bad way that they had, unfortunately, to make a cut of 2½ per cent. at the expense of their employés. I would like to direct the attention of the House once again to paragraph 10 of the White Paper, which says:
Rates, fares and charges will be adjusted to meet variations in working costs and certain other conditions arising from the war, and machinery will be provided to this end.
I do not think it can be disputed that all the items in the increased costs come within the ambit of that paragraph. What in fact was there to consult about with the Railway Rates Tribunal? To refer the question to them would have simply led to a long investigation covering many weeks, and covering also exactly the same ground and reaching precisely the same conclusion as the finance department of the Ministry of Transport. All

the time arrears would have been mounting up at the rate of nearly £400,000 a week. It has been argued by the hon. Member for Kennington (Mr. Wilmot) that we ought to have waited until we could assess more accurately the costs arising out of the war.

Mr. Wilmot: I did not say that.

Mr. Bernays: The hon. Member quoted the "Economist" with approval on the point.

Mr. Wilmot: I said that the Government ought to have taken into account not only the rising costs but the rising revenue as well.

Mr. Bernays: He also made the argument that we ought to have waited until we could assess the exact loss on the year's working. I suggest that if we had done that, the proposed increase would have been substantially in excess of the present 10 per cent. Surely, if there are to be increases in railway charges, the users of the railways would prefer that they should be made as and when the necessity arises and that they should not take the form of a salmon leap, as was the case after the last war. The Leader of the Opposition, in the "Daily Herald" yesterday, was writing about a more businesslike administration. Surely it is businesslike in the matter of an increase in rates to make the increase at once and not wait until arrears have accumulated. Hon. Members opposite are always pleading for action, decision and foresight; and when we give them action, decision and foresight, they turn round and blame us for being high-handed and dictatorial. There is really no pleasing hon..Members opposite. Indeed, since I have been on the Front Bench I have realised what "Heartbreak House" really means.
How can these increased costs be met except by increased charges? It is argued that they ought to be paid by the railways themselves out of their present revenue on the ground that the railways are saving on a wider spread of non-variable expenditure. In other words, it is suggested that though costs are going up in one direction, they are coming down in another, owing to a decrease in overheads. My first answer to that is that it is really based on a misconception of the increased gross receipts of the railway companies in war-time. It is argued that


the railways are already making profits fully 30 per cent. above pre-war, and that this extra £18,000,000 which is taken from the railway users will enable them to make larger profits. That is the gravamen of the charge brought against us to-night. I admit that as I travel on our railways I get the impression of a very substantial increase of traffic, which is really not borne out by the facts. As my right hon. and gallant Friend pointed out, the net increase in the gross railway receipts is £9,750,000, or only 8½ per cent. I do not think that an increase of only 8½ per cent. in the gross receipts of the railways can be called profiteering.

Mr. Wilmot: Is the London Passenger Transport Board included in that figure?

Mr. Bernays: Yes, Sir. It must be remembered that even this relatively small increase must be compared with a period when the railways were working very far short of capacity. Before the war, each train, whether freight or passenger, had to bear far too high a burden of overheads, judging by normal business experience. There was thus a great amount of slack to be taken up, and if in fact this element of increased spread had been introduced in the assessment of railways rates, the principle that the Control Account should be allowed to retain the profits derived from the extra services would have been prejudiced, and the railways would have received no adequate return for the services they are rendering.
This brings me to the crux of this Debate. Is it really suggested that the railways ought to reap no increased benefit from the increased use of their systems? If that is the view of hon. Members opposite, they are applying to railways a principle which is applied to no other concern. While every effort is made to see that no undue profits are made, it is not suggested—at least, I have never heard it suggested—that industries should not be allowed to make a penny more now than they made in the worst days of the slump. That certainly has not been applied to such industries as coal-mining and cotton. In the days before the war, the railways were not making normal profits. They were making sub-normal profits. Let us see what was happening in those pre-war

days. The hon. Member for Central Hackney (Mr. Watkins), who is President of the Railway Clerks' Association, put his finger on the point in the Debate on the Railway Agreement on 13th February last. He was referring to an hon. Member who was concerned about the possible rise in freights, and he said:
It seems to me that in those years"—
the pre-war years—
he and others were not paying sufficiently high rates because the industry had to be subsidised by cuts in wages. The workers do not want that to happen again. These terms"—
the Railway Agreement
would provide for a minimum of 3·3 per cent. on the total book capital and a maximum of 4·7 per cent. Are there any other industries in the country that are satisfied with such a small amount?"—[Official Report, 13th February, 1940 col. 695, Vol. 357.]
The hon. Member made that speech on 13th February. To-night, he made a rather different speech. But I suggest that the position is exactly the same now as on 13th February. He said that he hoped the railways would not profiteer; he admitted, on 13th February, that they were not profiteering. The position has not changed. They are not profiteering now. Really it is only out of these proposed increases in charges that the general level of wages can be maintained. We often hear the cry that the stockholder is doing well. But the railway worker is intimately concerned in these increased charges. I cannot speak with the same authority as hon. Members opposite on the subject of coal, but I would remind them that it was out of the increase in the pit head charges for coal that the rates of wages in the mining industry were increased. It is only out of these increased charges to the railway users that the level of wages can be maintained. The Railway Agreement and the steps taken to implement it are benefiting the workers in that industry.
My hon. Friend the Member for Newport (Sir R. Clarry) argued that this increase represented a factor in the vicious spiral and that the Government ought to do something to prevent it, but what steps can the Government take to prevent this rise in railway charges except by subsidies? They would have to subsidise the railways at the expense of the general


taxpayer, and I cannot see any justification for that. If the Government subsidise the railways, then they must subsidise all forms of traffic. If road transport was not similarly subsidised, it would place it at an intolerable disadvantage as compared with the railways, and that is true too of coastwise shipping. In giving such a subsidy, the Government would be subsidising in part traffic which had no relation whatever to the war effort. It was deliberately decided by the Government, with the grim example of the last war in front of them, that the railways must be placed on an economic basis, and from that position His Majesty's Government cannot depart. That does not give to the railways freedom to charge what rates they like. Every item of increased costs has to be submitted to my right hon. and gallant Friend, and is subject to rigorous examination before it can be offset by increased charges.
It has to be proved that these increased costs arose during the war, and were of

a nature beyond the railways' control. The Minister will always have at his hand, when necessary, the advice of the members of the Railway Rates Tribunal. It remains open for any body of users to make representations to the Minister as to the level of the charges, and for him to forward them to the Consultative Committee for further consideration. That was the procedure laid down under the Railway Agreement, that was the procedure followed by my right hon. and gallant Friend, and that was the procedure agreed upon by the House. I believe that the railway users will accept these increases, burdensome though they undoubtedly are, as fair and reasonable, and that they will agree that it is in the best interests of transport as a whole that the railways should pay as they go.

Question, "That this House do now adjourn," put, and agreed to.

Adjourned accordingly at Six Minutes before Eleven o'clock.